Do-up sale tax rules

Question from Leon updated on 26th January 2017:

Just wondering - if we sell a house that we have fixed up (which is not the one we live in) what are the tax obligations? Do we have to have a company to write off any expense to fix it up? Any information appreciated.

Our expert Mark Withers responded:

The law is quite clear on this point. If you acquired the property with an intention to dispose of it any gain derived is taxable. There are exemptions if the home is the residence of the taxpayer but this will not apply in your example.

You are entitled to deductions for the costs incurred in fixing it up along with holding costs of interest, rates and insurance. Also, costs of disposal - such as agents fees - are legal costs. The taxing provisions on acquisition with intention to dispose apply regardless of how long you have owned it - ie: they can still tax a gain even if the time frame falls outside the new two year bright line test.

The rules and allowable deductions apply regardless of what entity owns the property. Also, note - if this activity becomes continuous and regular you must also register for GST.

Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.

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