ATO warn developers over capital gains tax

The Australian Taxation Office has been monitoring the impacts of offshore capital on local developer’s decisions to sell out.

The ATO’s Deputy Commissioner Tim Dyce advised recently the tax office had begun auditing property developers ­carrying out activities which conflict with their stated purpose of capital investment.

“A growing number of property developers are using trusts to suggest a development is a capital asset to generate rental income and claim the 50% capital gains discount,” Dyce was reported as telling the Australian Financial Review.

Developers need to be careful when seeking the 50% discount on any capital gain on the sale of property which they had held for development and not as a long-term investment.

The developer will have to prove to the tax office the true intention of the property, making sure there was never any marketing for a development or that there were never any internal minutes documenting an intention to develop.