ato logo
Search Suggestion:

Renovating properties

If you renovate one or more properties, how you go about it can affect your tax obligations and entitlements.

Last updated 9 July 2020

If you renovate one or more properties, how you go about it can affect your tax obligations and entitlements. It depends on whether you are:

For help working out which one applies to you, visit Are you in the business of renovating properties?

Personal property investor

If you're considered a personal property investor, your net gain or loss from the renovation is treated as a capital gain or capital loss.

A capital gain or loss is the proceeds from the sale of the property, less the purchase price and other costs associated with buying, renovating and selling.

Capital gains tax (CGT) concessions such as the CGT discount and the main residence exemption may reduce your capital gain.

For GST purposes, you are not conducting an enterprise and are not required to register for GST. But if you are registered in some other business capacity, you do not pay GST on any sale proceeds or claim GST credits for related purchases.

See also:

Profit-making activity of property renovations

If you're carrying out a profit-making activity of property renovations also known as 'property flipping', you:

  • report your net profit or loss from the renovation in your income tax return
  • are entitled to an Australian business number (ABN)
  • may be required to register for GST if the renovations are substantial.

See also:

  • Property and registering for GST
  • To decide whether or not a property has been substantially renovated, read from paragraph 53 of GSTR 2003/3: Goods and services tax: when is a sale of real property a sale of new residential premises?

Business of renovating properties

If you're carrying on a business of renovating properties or 'flipping' properties:

  • they are regarded as trading stock (even if you live in one for a short period)
  • the costs associated with buying and renovating them form part of the cost of your trading stock until they're sold
  • you calculate your business's annual profit or loss in the same way as any business with trading stock.
  • you're entitled to an Australian business number (ABN)
  • you may be required to register for GST if the renovations are substantial.

CGT doesn't apply to assets held as trading stock, and CGT concessions (such as the CGT discount, small business concessions and main residence exemption) don't apply to any income from the sale of the properties.

See also:

QC23644