Since capital gains tax was introduced by Mr Keating in 1985 there is one section of the Tax Act that is largely forgotten and mostly ignored. One should be careful about ignoring the Tax Act.

If you buy a property with the INTENTION of jazzing it up, renting as a negatively geared property and subsequently selling to receive capital gains it is very clear that you have entered into a profit making scheme. At the end of the day the profit made on the eventual sale of the property is not taxed as a capital gain (such tax has always been concessional) but is fully taxed as the profit made from a profit making scheme.

It is even possible that a negatively geared property with an interest only loan MUST be part of a profit making scheme because no sensible business man would ever tie himself to losing money indefinitely.

If you are thinking that it is about time to pluck several tens of thousands of dollars from the property money tree that is allegedly growing in backyards throughout every suburb in Brisbane , simply by buying renting and then selling at a huge profit after the rent has paid for the building, you should seek to avoid the profit making scheme trap.

Tax is payable fully on any profit making scheme, there is no 50% discount on the “capital gains” that have been made.

How will the tax office know what your intention was? Pieces of paper that mention sale and/or future capital gains sent to a bank, an accountant, or a letter to grandma asking for her financial help. I have received an e-mail in my office clearly spelling out a development intention which would have been unshakeable evidence that the original property was purchased with the intention of making a profit at the end. If that matter had proceeded and the Tax Office had seen that e-mail the potential tax bill would have increased by the order of $80,000.

During the war there was a saying plastered on billboards throughout the city “Loose lips sink ships”

Be warned!