I have a block of land which was purchased in my partners and my name. The block has been rezoned R100 hence could potentially build 16 units on it. I have advised to be careful re GST and CGT when the apartments are sold. Does anyone know what the implications are. The block is in Perth WA.
Also I would like some advice on whether we should be setting up a trust etc to do this development. Obviously the block is currently in our own names…….
Cheers
If you are building to sell, the profits will most likely be treated as revenue income, rather than capital profits. This means that you won't be eligible for any CGT discounts.
You will need to register for GST. You will be able to claim the GST on your building costs, and will have to pay GST on the sale of the apartments. You may be eligible to use the margin scheme when selling the apartments, which will reduce the GST you have to pay on the sale.
As the block is already in your own names, it can be an expensive exercise to transfer it into a trust. You may have to pay stamp duty, depending on WA stamp duty rules re: transfers between connected entities. You may also have to pay some CGT on the gain in value between purchase date and transfer date.
But it could still be worth considering a transfer to a trust for added asset protection and tax reasons. Do the numbers.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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