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Taxation in Real Estate - a world of it's own

Many of us are exposed to real estate transactions in our lifetime, some more frequently than others. We may buy, inherit, rent, develop or sell property, but do we really understand the taxation consequences or benefits of doing so? Are we using the most appropriate structure? Are we getting the most out of it? Are we protecting our asset and wealth? These are only a few of the many questions we should be asking ourselves, but how often do we do it and more importantly when do we do it? Is it too late?

Getting back to the first question, do we really understand the taxation consequences and benefits of our real estate transactions? The taxation legislation which outlines the treatment of Capital Gains Tax (CGT), profits and GST relating to real estate transactions is quite complex and often dictated by the facts of each case. As a result, this is unlikely to be a straightforward answer and generally requires appropriate specialist advice.

By way of common example, most people are aware that a capital gain or loss on the sale of your home or unit is disregarded providing it was your main residence throughout the ownership period. However, do you understand the requirements that ensure the home was your main residence throughout the ownership period? Are you aware that moving out of the home for a period of time or acquiring a new home that you intend to live in can potentially change this treatment? Given a substantial part of our wealth is locked up in our homes, we should place a level of importance in ensuring we understand and address these issues.

Identifying and addressing the real estate issues becomes far more prevalent for investors, developers and business owners given that additional taxation consequences may apply. Such consequences include for example GST and the treatment of capital vs. revenue gains. Failing to address these issues and to structure accordingly may result adverse decisions being made and unfavourable taxation outcomes.

Real estate ownership is the great Australian dream, but it can easily turn into a nightmare if you aren’t prepared and haven’t considered the potential taxation implications. As outlined above this is not always straightforward given each transaction or situation is not identical. Given the wealth we hold in real estate and the substantial cost of stamp duty, unwinding transactions in most cases becomes unviable. It is therefore imperative that you seek the appropriate advice upfront, which should be actioned prior to execution of contracts.

At Hayes Knight, we have experienced staff who specialise in advising clients in various aspects of real estate transactions. Please don’t hesitate to give us a call if you need any advice around your next real estate transaction.

Hayes Knight (NT) Pty Ltd | Accountants & Business Advisers
7/90 Ross Smith Avenue, Fannie Bay, NT 0820 | PO Box 39931, Winnellie, NT 0821
T 08 8981 5222 | F 08 8981 6999 | W www.hayesknight.com.au| E infoHK@hkdwn.com.au

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Taxation in Real Estate - a world of it's own