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.
