Watch out: Selling a property you've held for a long time as a rental might not always be considered a regular sale for tax purposes.
Usually, when you sell a property used for renting or investing, it's seen as simply cashing in on an investment (known as 'capital account'), even if you've fixed it up. That's because properties like these are usually bought for long-term purposes, not specifically to make a profit.
But sometimes, selling a property that's been rented out for a while can be seen as part of a money-making plan or business. This usually happens when there's been a lot of building work involved. One case, called August v FCT [2013] FCAFC 85, shows how profits from selling such properties can be seen as part of a money-making plan.
In the August case, the person bought blocks of land over time, renovated some, built buildings on others, and rented them out. Then, they sold them, including one group of shops.
The outcome: It was seen as a money-making plan.
Here's why: The court didn't believe the person's intention was to hold the properties for the long term, mainly because their story about why they bought and sold the shops didn't add up. Plus, there were inconsistencies in their evidence.
If you have any questions, feel free to contact Tax Ideas Accountants & Advisers. You can also book an appointment through our live calendar.
