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House & Land Development Tax Planning

by | Sep 22, 2018 | Capital Gains, General, Property Taxation, Tax Planning

House & Land Development Tax Planning Opportunities

Property Development Tax Planning

Property Development Tax Planning Opportunities for Mums & Dads

Property development has become a way for mums & dads and the like to capitalise on their big backyards, with a small property development subdivision. Those with house lots over 1000m2 have opportunities to do their own development.

Every State, Region in Australia has minimum lots sizes depending on zoning.

See:- Brisbane City Council – Selected Zones and minimum lot sizes

Zone Zone precinct Front lot (m2) Rear lot (m2)
Low density residential 450 600
400 (small lot) 600
Low density residential around centres* 300 (small lot) 600
Character residential Character 450 600
Infill housing 300 450
Low-medium density residential 2 storey mix 260 350
2 or 3 storey mix 260 350
Up to 3 storeys 180 350
Rural residential 10,000
Proposed House & Land Development if you are a Developer
Sale Price of Complete House & Land         1,250,000           125,000    1,375,000
Development Costs
Land Purchase Cost (or deemed)                  300,000                   30,000#           330,000#
Stamp Duty on Land                      9,719                9,719
DA & Infrastructure Charges                  105,000                   10,500           115,500
Build Cost House                  550,000                   55,000           605,000
Landscaping On Completion                    16,500                     1,650              18,150
Agents Commission to Sell                    32,340                     3,234              35,574
Interest on the holding cost during build See Calc@                    35,630                            –              35,630
Legal fees on the sale                      3,182                         318                3,500
Total Costs of the Project         1,052,371           100,702    1,153,073
Pre Tax Profit
GST Payable
Cash inflow
Less GST Payable
–           24,298
Net After GST Cashflow
Estimated Tax
27.50% 54348
After Tax Cash Profit

The above example is on the assumption a developer has purchased the backyard block from a mum and dad.

# GST would not be applicable if splitting your own backyard on the deemed purchase value.

# GST Margin Scheme would provide a better tax outcome – saving GST on the sale, $1,375,000 – $300,000 = $1,075,000 @1/11 = $97,727, rather than $125,000, the difference would flow into increase before tax profits. In addition GST could still be claimed on the above development costs.

@ Interest holding cost would also be substantially less if you already own the land.

As you can see, if you have the energy, time, contacts, mums and dads can beat the property developers at their own game 🙂

Property Developments can come in varying degrees

  1. Developments can start as a simple split of the backyard to be sold off – generally with no GST, and CGT opportunities to reduce tax – profits on a Capital Account
  2. Similar to above, with the building of a house, to either sell – CGT Event on the land deemed as trading stock, GST – Margin Scheme, profit on Revenue Account
  3. As with option 2, however moving into the home to live in, and sell the old original front house – No GST, CGT Event, profit on the sale of front on Capital Account
  4. In addition to option 3, however renting out the front and or back new house – No GST, No CGT, rental income on a revenue account.

Either way many are sitting on valuable land that they no longer need, or want to mow, however would still like to live in the same or in a new area.

A small subdivision could be your ticket to fund your next move or fund your retirement.

If you would like further information, please contact our office to discuss your options.


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