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Capital gains tax is alive and well 12 Nov 2012

 THERE is no formula for determining when you have bought and sold enough properties to have reached a point where profits on those sales have become taxable.

The following is a rough guide as to when the sale of land and buildings could be taxed:

· The property is bought with the intention of sale. Compare this with buying a property with the intention of deriving rental income.

· You subdivide the property within 10 years of buying it and the work involved is more than minor. These rules do not apply to residential homes or building premises.

· You do a major subdivision on the property 10 years after buying it and the work is significant

· The purchaser or an associated entity to the purchaser is in the building business and buying to carry out building improvements. Rental properties he owns can also get caught in the tax net if building improvements are carried out and the property is sold within 10 years of the improvements being completed.

· You are closely related to someone involved in property development and you sell property (including rentals) within 10 years of acquisition. The relationship is specifically defined in the law.

· You are making windfall profits as a result of a rezoning, which has taken place within the past 10 years.

The law relating to taxation of profits on sale of property is tricky. If in doubt, consult us. Sale of your home is not generally taxable so long as you do not make a habit of doing this. If you are a developer and you regularly change homes, be careful.

 

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