It is important to know the difference between a Property Trader and a Property Investor as there may be CGT and GST implications.

A Property Trader is a person who tries to gain income through purchasing property by flipping it quickly, when the property has received significant capital gains or after renovations.

An investor buys into property with the intention of producing long term capital growth or rental yield. Investors typically hold onto property for longer than traders.

Traders looking to renovate before reselling generally have to register for GST if the renovations are substantial. They must report the net profit or loss in their income tax return.

In the case of “flipping” properties, the purchased properties are regarded as trading stock. The costs of buying and renovating form part of the cost of the trading stock until they are sold.

CGT does not apply to assets held as trading stock (even if you have lived in them). The CGT discount, small business concessions and main residence exemption don’t apply to any income from the sale of the properties.

The main distinction between trading and investing in properties is intention, which is used to determine the nature of the transaction.

If you can prove that you have purchased a property, with the intention of holding the property for income, selling it shortly thereafter because of a good offer, doesn’t necessarily redefine the transaction into one of trade.

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