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Tim
11-03-2007, 09:26 AM
I am subdividing my rental property and will build and sell spec house.Am I liable for tax on profit, if so how can I minimise it?

duncan macgregor
11-03-2007, 09:38 AM
quote:Originally posted by Tim

I am subdividing my rental property and will build and sell spec house.Am I liable for tax on profit, if so how can I minimise it?
Remember it wasnt me that told you this[:I]. Do up your own private property at the same time with materials claimed on the spec house.[V][V]macdunk

Halebop
11-03-2007, 09:51 AM
quote:Originally posted by duncan macgregor

Remember it wasnt me that told you this[:I]. Do up your own private property at the same time with materials claimed on the spec house.[V][V]macdunk


...you had problems with someone drawing down their student loan to invest in shares?

Halebop
11-03-2007, 09:57 AM
quote:Originally posted by Tim

I am subdividing my rental property and will build and sell spec house.Am I liable for tax on profit, if so how can I minimise it?


The acid test is intent. It is not your own "owner occupied" house. You are building it for the purpose of resale. You are liable to pay tax on the profits. You get to deduct your inputs and financing costs. This is fair. It's from these taxes that student loans, future retirement provisions and roads are financed.

Purely from a tax planning perspective the best way to minimize or defer tax is not to sell it. I'm unsure of the rules now but it used to be that if you owned the property for 10+ years you would not incur tax at sale time.

Halebop
11-03-2007, 10:11 AM
...you also might want to consider how developing the spec house could taint your ownership of the rental property. This could be mitigated by using different structures for each (and reduce the impact/risk of creditor claims should something go wrong with the spec house after sale).

Tim
11-03-2007, 03:16 PM
still confused. I can sell section , no tax to pay but if I put a house on it then sell i will have to pay tax???

Halebop
11-03-2007, 05:19 PM
quote:Originally posted by Tim

still confused. I can sell section , no tax to pay but if I put a house on it then sell i will have to pay tax???


That was exactly the rule but I say was because I don't know if the 10 year rule still exists. If it doesn't it could be even worse than that! 'Course my recollections are free so you are getting what you pay for [:p]

Steve
11-03-2007, 05:26 PM
The relevant section of the Income Tax Act is CB which you can look at online if that helps?

CJ
13-03-2007, 12:59 AM
quote:Originally posted by Halebop

...you also might want to consider how developing the spec house could taint your ownership of the rental property. This could be mitigated by using different structures for each (and reduce the impact/risk of creditor claims should something go wrong with the spec house after sale).
You cant taint gong back, only going forward so the current rental should be fine.

Why not build another rental. Change you intentions after it is built due to changing circumstance (after preferably renting for a period of time) and it will all be non taxable.