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There are a number of issues. In NSW in similar zoning a subdivision may require construction of roads, provision of electricity, contribution to council infrastructure.
Talk to your Council town planner
When you say "only days after" what do you mean? Was the pest inspection done pre exchange, or was it done during any cooling off period, or was it done during any period the contract gave you to get a satisfactory pest inspection?
If it was done outside any cooling off or contractual period, your contract may have obliged you to settle anyway so in that case the pest report would not have been a factor and any damages might be extremely limited.
I appreciate that this is very distressing to you, but without your giving relevant dates etc it is hard to give you any advice except go and see your solicitor.
I can't comment on Steve's experiences some years ago, but now the banks will specifically ask about personal guarantees and will ask if you are a director of a company.
CGT calculations are based on market value of the property. If you can convince the ATO that if your relation hadn't been willing to buy it for $5, you would have willing sold it to a nonrelation for $5, no problems.
Does your partner own the house you are living in? If so, you ahve three options:
a. you both agree that your house is the PPOR for the 6 years from when you moved out and your partner loses PPOR status on your partner's house
b. you both agree that your partner;s house is the PPOR and you lose PPOR status on your house from when you and your partner moved in together
c. each house is 50% PPOR
Unless you are classified as being in the enterprise of developing land, GST will not apply.
My understanding is if the margin scheme applies, then 1/11th of your purchase price is deemed to be GST,
so sale $400 = $36,363 GST
GST credits – margin scheme $27,272
GST paid on purchase costs (NB stamp duty won't have GST)
GST paid on reno costs $30K = $2727
GST paid on selling costs
so net GST will be about $6K
What kind of infrastructure is in the town already eg schooling, health?
Many miners are employed by contractors to the mines who might be on a 2 or 3 year contract. When the contract expires all those miners might be offered positions interstate or nowhere even if the contractor has a contract nearby.
How far is the nearest regional centre? Some miners would prefer to live there and go back from the mine site after their shift roster. If the mining company is going to be offering shifts like 4 on 4 off more miners might live locally, if it's going to be 7 or more on, that's more likely to be fly in.
Blocks of one bedroom flats or a motel might be an option.
Just be careful. In NSw a few years ago if the name on the contract was XYZ as trustee for ABC trust, the Office of State Revenue wanted double stamp duty.
http://www.ato.gov.au/individuals/content.asp?doc=/content/57402.htm
http://www.ato.gov.au/businesses/content.asp?doc=/content/19998.htm&page=1#P942_114024
http://www.ato.gov.au/businesses/content.asp?doc=/content/19998.htm&page=1#P1016_124833
Quite frankly I find it difficult to tell where the line is drawn between Example 1 and Example 4
Are your parents intending to go on a pension? If so giving the property to you could affect their entitlements. You need to get advice as to whether at the acquisition of the property it is possible to argue that the property was always your under an arrangement with your parents. You will probably need a Private Binding ruling.
Get a valuation done. Note CGT may be applicable unless this was your wife's PPOR and you both elect that it be your PPOR for CGT purposes, this will mean your existing house will lose some of its exemption from CGT as a PPOR. If this had bee your wife's PPOR the value for CGT will be reset at the value as at the date it first started earning income
If the property is not available for rent in the peak season the ATO will not necessarily regard availability as an appropriate apportionment method but might consider actual period rent was received for as a more appropriate apportionment method. The issue being whether the characterisation of the house is as a means of earning income or whether it is a personal lifestyle choice where some income is received to offset expenses
Have you paid rent to your parents?
Was there any agreement or arrangement made when the prioperty was purchased between you and your parents as to what would happen in the future?
From reading Steve's book in its first edition I recall 2 methods:
a. as a property increased in value, selling it and reinvesting in multiple properties in an overlooked area – did he call this Divide and Multiply?
b. wrapping: so that the purchaser under the wrap paid a deposit which could then be used by the vendor in another transaction
Once your mother has been in the nursing home for 2 years doesn't the home form part of her assets under the assets test?
No, you can't get a loan to 'pay us back'. The borrowing would be for a private purpose.
If you are receiving a Living Away from Home allowance your employer will be paying Fringe Benefits Tax and it shoudl not be txaable (or any deductions) as far as you are concerned. If you are being paid a travelling allowance that is a diifferent kettle of fish and the allowance would from part of your income and you would be able to claim deductions against it
You should move in before doing the renos because to start with this as a PPOR you need to move in as soon as possible after settlement. You can only have one PPOR at a time subject to the exception allowing up to 6 month sfor 2 PPORs where the one you moved out of is sold. After you move out of your PPOR you can be exempt from CGt on that property for up to 6 years as long as you have no other PPOR. If you subdivide and build to sell then you are likley to be taxed on the profit at your marginal rate.
Why do you think your existing PPOR would make a good IP? Prima facie – a return of $300 p.w is a gross yield on $420K of 3.7% per annum before expenses and you would be paying 6% plus on your borrowings.
What is it about your PPOR that makes it a good IP? Is it a low maintenance yard, is it close to services, does it have good potential for capital growth. Is there a demand for rental in your area?If you sell and rebuy you are still likely to have a loan of $110K, because of selling costs and stamp duty when you buy. Is the cheaper house going to be better in the longterm than your existing house?
