Thanks for your imput Terry.

I thought it sounded very strange also.  I even asked him if he handled this sort of thing very often? He said he has/does for clients and himself and as far as the ATO are concerned it's a black and white situation.
I know people who have done this and it's a fairly common thing from what I hear. I would also prefer to hang onto the property.

I'll contact the ATO and keep researching.