Investment Property - CGT & Tax question
 

Here is my question with some facts:

• 2 other businesspartners purchased a dilapidated property on a 1000m2 block on 13/04/15.
• We extensivelyrefurbished the property which was completed around 31/08/15 and we currently rent out as a holiday rental.
• We subdivided theplot of land on 12/08/15 creating 2 plots (Plot A with existing house and PlotB vacant land).
• We constructed aholiday cabin on the rear Plot B due for completion 28/02/16.
• The refurbished houseis on Plot A, with the new cabin on Plot B.

A summary of the dates is as follows:

• 13/04/15 = Purchased house and land
• 12/08/15 = Land subdivided creating Plot A and Plot B
• 31/08/15 = Plot A house refurbishment completed
• 28/02/16 = Plot B cabin construction completed

Our concern is if we sell either Plot A or Plot B with the property constructed on it, to ensure wereceive the 50% CGT reduction do we need to sign contracts either 12 monthsfrom the purchase on the initial property (13/04/16) or 12 months afterofficial completion of the refurbishment (31/08/16) or construction (28/02/17). Thanks guys, Shaun

Re: Investment Property - CGT & Tax question
 

HI Shaun,
The tax office may treat this as a "business" rather than the mere realization of the land as an asset. Ie, if you just subdivide a block of land and sell it not such a big deal right. One off development. But where you have business partners who have purchased, subdivided, then completed some extensive renovations/construction - an argument could be made that this is in fact a going concern - you are in the business of developing property and therefore the land is "trading stock". If that is the case then CGT is not applied and no discount. Rather, the profit will be treated as revenue and taxed as normal income.

Again, i am in no way an accountant and very happy to be proven wrong (im drawing on tax law that i did at law school 10 years ago!).

Re: Investment Property - CGT & Tax question
 

I agree with your logic Craig, subdividing so quickly???? what preliminary work was done prior to the 13/4/15 acquisition date?
Also a concern might be the renting out as holiday home versus any of the owners using as principal residence?