Understanding Tax Treatment for Property Sales
When you sell real estate, the first thing to figure out is whether it's part of your regular property business. If it is, then it's considered trading stock, and it's taxed differently under specific rules in Division 70.
Trading Stock Definition: Trading stock includes anything you've produced, made, or bought to sell as part of your business. So, if you're buying land to sell it as part of a property business, it's considered trading stock.
Starting a Property Business: To figure out when your property business started, you need to pinpoint when you started a series of operations to sell land. The ATO says a property business starts when you begin a continuous cycle of operations aimed at selling land.
Determining a Property Development Business: Deciding if you're running a property development business depends on various factors. The ATO lists things like whether your activity is commercial, whether you're planning to make a profit, and if you're carrying out your activities in a businesslike manner.
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