Tax issues when holding land as trading stock (2)

When someone sells land they've been holding to sell, there are three tax outcomes to consider:

1. The money made from selling the land is taxable income.
2. Some deductions for the cost of the land still on hand might be put off until later.
3. Certain expenses can be deducted right away. These might include:

• General admin, marketing, and selling costs.
• Interest on loans used to develop the land.
• Costs like interest, council rates, and land tax while holding the land. Recent changes to deducting costs for vacant land generally don't affect land held for sale in a property development business.

Treating these costs is different from how they'd be treated if the property was just bought to make a profit. In that case, deductions for these costs are delayed until the property is sold, and then they're counted as part of the profit.

TAX TIP: Property held to sell is different from property bought to sell. The law doesn't say the property has to be bought specifically for resale, just held for sale as part of a land development business.

Got questions? Reach out to Tax Ideas Accountants & Advisers at +61 2 83181545 or book an appointment on our live calendar.