Renovating and flipping your home for profit . The potential Tax Implications

Renovating and flipping your home can be an exciting and rewarding experience as a homeowner. However, before you embark on a renovation project to sell your home for profit, it’s essential to understand the tax implications involved.

After watching TV shows like the Block, are you inspired to become a property flipper?
In this article, I will explore the basics of renovating and flipping your home, the ATO tax implications, and offer tips to help you maximize your profit while avoiding common mistakes.

The Basics: What is Renovation and Flipping your home?

Renovation is improving or updating your home, either for your enjoyment or to increase its value. This can involve anything from cosmetic changes, such as painting and decorating, to more substantial alterations, such as adding an extension or converting a garage.

Flipping, on the other hand, refers to buying a property to renovate it quickly and resell it for a profit. Flipping can be a lucrative business, but it does come with risk and requires careful planning and execution.

Understanding the ATO Tax Implications for Renovating and flipping your Home for Profit

Renovating and flipping your home is something that can be financially rewarding . When renovating your home for profit, there are several tax implications to consider. Firstly, it’s essential to understand the concept of your main residence and how it affects your tax obligations.

Your main residence is the home you live in. In many cases it is exempt from capital gains tax (CGT) when you sell it. However, suppose you renovate your main residence with the intention of selling it for profit systematically. In that case, you may be liable for tax . This is occurs when it was treated as trading stock due to the renovation business. This can be a complex area, so contact Geoff for professional advice.

What is Main Residence and Why it Matters for Tax Purposes?

As mentioned, your main residence is the home you live. It’s important to note that you can only have one main residence at a time. You must use it as your main residence to be eligible for the CGT exemption.

If you own more than one property, you may choose which one is your main residence. But you must nominate this in writing to the ATO. It’s also worth noting that if you rent out part of your main residence, such as a spare room, you may be liable for CGT on a portion of the sale price.

Renovating and flipping your Home can change you home from tax free to being subject to income tax.

Claiming Tax Deductions for Renovation Expenses

When renovating your home for profit, you may be able to claim tax deductions for certain expenses. These include materials, labour, and professional fees such as architect or engineer costs. However, keeping accurate records of all expenses and seeking professional advice to ensure you are claiming correctly is essential. It’s also worth noting that you cannot claim deductions for expenses that are not directly related to the renovation, such as general maintenance or repairs.

Tax Implications for Selling Your Home After Renovation

When you sell your home after renovation, you may be liable for CGT or income tax on the profit derived. The ATO may treat your activity as a business, and it becomes income of an ordinary nature classified as a business renovation business

Additionally, if you sell your principal residence and meet specific criteria, you may be eligible for the principal residence exemption.

The profit-making activity of property renovations – per ATO
If you’re carrying out a profit-making activity of property renovations, also known as ‘property flipping’, you:
• Must report your net profit or loss from the renovation in your income tax return
• You are entitled to an Australian business number (ABN)
• You may be required to register for GST if the renovations are substantial.

We can assist you here if you unsure what to do next. Call Geoff on 95979966 for a confidential discussion.


You may live in the property as your home for all or part of the ownership period, BUT it does not automatically mean that the profits from the sale are exempt from income tax. The main CGT residence exemption only applies to reduce capital gains; it cannot reduce amounts taxed on the revenue account if the ATO deems you in the property flipping business.

Examples of flipping vs home renos

Jock and Jill buy a house that needs renovation, move in and, over the next six months, renovate it, landscape it and then place it on the market. This is renovating your home to flipping. In the meantime, they acquire their next one and start the same process. The ATO may deem them in the property development business based on the actions and facts.

But on the other hand, the ATO may deem the profit as income as a property flipping business.
Whereas Freddy and his wife buy a house and move in. They slowly renovate and enjoy it as their home. Freddy decides after a few years to sell and buy a bigger one. Provided they meet the CgT exemptions as their principal residence, then the gain on the sale would be exempt

Tips to Maximize Your Profit While Renovating Your Home

To maximize your profit while renovating your home, planning carefully and making informed decisions is essential. Firstly, consider the location and market demand for your property. Renovations well-suited to the local market and adding value to the property are more likely to result in a higher sale price. Setting a realistic budget and sticking to it is essential, as overspending can eat into your profit margin. Finally, consider enlisting the help of real estate agents, builders, and tax experts to ensure you are making the most of your renovation project.

Action – tread carefully when flipping your homes!

Renovating your home for profit can be lucrative, but it’s essential to understand the tax implications involved. By understanding the concept of your principal residence, claiming tax deductions correctly, and seeking professional advice, you can maximize your profit while avoiding common tax mistakes of being a flipper