If you’re considered a individual property investor, your net gain or loss from the renovation (proceeds from the sale of the property less the purchase and other costs connected with buying, renovating and selling it) is treated as a capital gain or capital loss respectively.
CGT concessions such as the CGT discount and the main residence exemption may reduce your capital gain.
You’re not conducting an enterprise of property renovation for GST purposes and are not required to register for GST, but if you’re registered in some other business ability you don’t pay GST on the proceeds from the sale of the property or claim GST credits for connected purchases.
If you’re renovating one or more properties you need to work out if you are a personal property investor, engaged in a profit-making activity of property renovations, or carrying on a business of renovating properties.
If you build new residential premises for sale, you’re liable for GST on the sale, and you can generally claim GST credits for your construction costs and purchases related to the sale.
Profit-making activity of property renovations
If you’re carrying out a profit-making activity of property renovations, you report in your income tax return your net profit or loss from the renovation (proceeds from the sale of the property less the purchase and other costs associated with buying, holding, renovating and selling it).
You’re allowed to an Australian business number (ABN) and you may be required to record for GST if the renovations are significant.