Month: June 2024

 

Australia offers many great opportunities for property development. But when constructing new buildings, whether for residential or commercial purposes, you must file the right tax returns to ensure you can budget effectively and operate legally.

There are several tax implications on property development projects. In this guide, we’ll outline the key tax rules that could affect your new build and whether you need to register them in your tax return.

 

Income Tax

The first tax implication to consider is income tax. You must pay income tax if you are generating income from your development projects, such as through rental properties or capital gains. For any properties that you own as trading stock, you will be charged your marginal income tax rate.

 

Goods & Services Tax (GST)

GST is a common tax implication for property development projects. You must factor it into your budget and plan these costs accordingly. You will be liable for GST if:

• You build new residential properties for sale.
• The revenue from your property transactions exceeds the GST registration limit.
• You are considered an enterprise with regards to your property development activities.

You can claim GST credits for building costs related to the sale of your new properties. If you’re selling existing residential properties, you won’t be required to pay GST.

 

Capital Gains Tax (CGT)

You may be required to pay CGT on the profits you earn when you sell your developed properties. The total tax cost will depend on the property purchase price, its final sale price, and any eligible expenses that can be deducted.

 

Stamp Duty

Stamp duty, also known as transfer duty, is applicable when you acquire land for property development purposes. Tax rates and rules vary between states, so make sure you familiarise yourself with your region’s transfer duty regulations before buying property. For example, Victoria abolished the transfer duty for commercial premises in their 2023-24 State Budget, replacing it with an annual property tax.

 

Land Tax

If you own land as part of a property development project, you may be required to pay land tax. This is a simple charge that is taken annually from landowners across Australia, but the rates and exemptions vary between states. 

 

Seek Professional Tax Guidance Before You Build

Property development projects require substantial effort. Make sure you are fully aware of every potential tax implication before you begin, otherwise you could quickly find yourself over budget.

Hiring expert tax consultants will ensure you budget appropriately and submit your tax returns correctly. You’ll be able to build legally and transparently while claiming the right deductions. Get in touch with our team at Glance Consultants today for professional tax advice on property development projects.

You are entitled to tax deductions if you are renting out a property you own. However, many rental property owners file incorrect tax returns, as they are unaware of their landlord responsibilities and which costs they can claim. The major error most people make relates to property repairs and renovations.

In this guide, we outline the differences between repairs and capital improvements in the eyes of the Australian Tax Authority (ATO). Learn the definitions of each and how you can claim the right deductions come tax-filing season.

 

What are the Differences Between Repairs and Capital Improvements?

Repairs and capital improvements are not the same. When it comes to filing your tax return, it’s important you know the difference:

• Repairs: According to ATO guidelines, repairs include any work done to fix damage to your property that occurs as part of renting it out. Repairs are necessary to restore your property to how it was before the damage occurred and can be claimed as part of your end-of-year tax deductions.
• Capital Improvements: Capital works or improvements concern structural work that enhances your property for future tenants. This goes beyond simple repairs and maintenance and can include works such as roof replacements, extensions, and garden renovations.

 

Tax Rules for Claiming Deductions

There are different rules regarding how to claim expenses for rental property repairs vs. capital improvements:

• Repairs: The ATO rental expense rules state that you can only claim tax deductions for repairs and maintenance if your property is continually rented out or remains genuinely available to rent. Any claims for property repairs must be made in the financial year when you incurred the costs.
• Capital Improvements: You cannot claim capital improvements on your rental property as deductions in the same tax year. Instead, capital works must be claimed at 2.5% over 40 years only after the improvements have been completed. You can also claim capital works as depreciable assets.

 

Claiming Deductions on Initial Repairs

You may find that repairs are needed when you first buy a property. These are known as initial repairs and cannot be claimed as a tax deduction. Any defects or breakages that existed when you acquired the property are counted as capital repairs and form part of the acquisition cost.

 

Hire Experienced Tax Advisors to Claim the Right Property Deductions

There’s no point in second-guessing your tax return. If even a small part of you is unsure whether you can claim deductions for your rental property repairs and capital improvements, it’s worth hiring a specialist.

 

Don’t risk falling behind on your taxes or overpaying your fair share. At Glance Consultants, our team of trained chartered accountants can take care of your rental property taxes, helping you claim the right deductions and pay the correct tax obligations. Contact us today to optimise your tax payments.