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23 June 2020 Tuesday

Property Development Businesses (3) - A mere realisation of a capital asset

By Ideas Group
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Understanding "Mere Realisation of a Capital Asset"

In simple terms, the concept of "mere realisation of an asset" refers to making a profit by selling something without actively running a business to generate that profit. When this happens, the profit is treated as a capital gain rather than income, which is usually more beneficial for tax purposes.

For example, selling a property that wasn't intended for business purposes or part of a profit-making plan is considered a mere realisation of an asset. This includes selling a home or a property used for long-term renting, or even selling a building used in your business operations.

Let's take a farming scenario as an example, like the Statham's case. In this case, the executor of a farmer's estate decided to sell off part of the farmland after the farmer's passing. The executor didn't do much beyond basic preparations for the sale, like hiring contractors to handle infrastructure work and listing the land with a real estate agent. Since the executor wasn't actively involved in running a business or making significant changes to the land, the profit from selling the lots was considered a capital gain.

If you have any questions about how this might apply to your situation, feel free to get in touch with Tax Ideas Accountants & Advisers at +61 2 83181545 or book an appointment through our live calendar.

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Written by Ideas Group

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