Investor News

Renovating Property In Australia

Property renovation in Australia is very popular.

Owner occupiers and investors renovate dwellings to add value, increase rental returns or just prior to sale to achieve the highest possible price.

A good starting point is to ask yourself a few questions about your goals, strategies and taxation considerations.

The Australian Taxation Office (ATO) will ask you some questions and include:

1.  If you renovate one or more properties, you need to work out if you:

• are a personal property investor
• have entered into a profit-making activity of property renovations
• are in the business of renovating properties, or
• have undertaken renovations that constitute substantial renovations.

Your conclusion will affect your tax obligations and entitlements. See ATO note ” Are you in the business of renovating properties? ”

See ATO note ” are you in business or doing a profit making activity?”

3.  Also ” are you a personal investor”

Consult with your specialist advisor or Accountant on these matters to develop a plan that is suited to your unique individual circumstances.  See our disclaimer

2.  Another ATO question is ” in regards to property renovation, are you in business or doing a profit-making activity?”

Whether you are in the business of property renovating or undertaking a profit-making activity in regards to property renovation, is a question of fact. Some of the questions you need to ask, in regards to your property renovating activities, to help you in this decision are:

• Are they regular and repetitive?
• What is their size and scale?
• Are they planned, organised and carried on in a business-like manner?
• Are they carried on for the purpose of making a profit?
• Do you rely on the income received to meet your and your dependants’ regular expenses?
• Are they of a similar kind and carried on in a similar manner, to the activities of other property renovating businesses?

In reaching a conclusion, no single factor is necessarily decisive and many may be interrelated with other factors. The importance given to each factor varies depending on individual circumstances.

However, you are likely to be entering into a profit-making activity if you acquire a property with the intention of renovating and selling it at a profit, and go about it in a business-like way.