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Not being an expert on Qld duty but the FAQ section of theOSR website on duties has the following example:
– Does the Duties Act 2001 allow a refund of duty paid on the purchase of vacant land when a person's principal residence (not being their first home) is subsequently built on that land?
No. Duty is assessed based on the circumstances at the time of entering into a transaction. The Duties Act 2001 does not provide for a reimbursement or refund if or when a person ultimately occupies the constructed residence.
Chapter 2, Part 9 of the Duties Act 2001 provides a transfer duty concession for first home vacant land only. See Information Sheet Transfer duty – concession for first home vacant land and Form 2.7
So you want to build on your Dad's land which means any building improvements automatically become his. You need to sort out ownership structure earlier rather than later.
If you build and ownrship of one is transferred will that mean there is a GST liability? Something you will need to check.
Is the land zoned for multiple dwellings?
Your friend has been told there is no market for IPs so what is the value going to be when built? If noone is interested in buying it's a buyer's market.
If this is such a good idea is there any reason why your father can't do this by himself? One of his ideas apparently was to build.
I wouldn't be surprised at 200+ properties being for sale. Most realestate.com.au searches show that for many locations
If there is a desperation to sell by others maybe you personally would be better off to lowball offer on existing properties.
While your desire to help your Dad is creditable there seems to be more work you need to do before you become committed to just one solution. Keep an open mind.
You haven't stated which state or territory you are in. In NSW it is quite common for pipes such as sewer mains to go through land without an easement showing on the title. For my PPOR we have a sewer main running at the rear of our property. No easement is registered on the title nor is there any reference to it on the title.
I would suggest your steps are as follows:
a. find out what type of drain it is and what the rights of the council are. I'd start by asking the Council in a very non-aggressive way, just seeking information so you can understand
b. once you find that out investigate what your options are eg can the drain be moved etc etc what and how can you build
c. investigate what your solicitor/conveyancer made inquiries for and what responses were received
d. your rights, if any, and who, if anybody you have rights against, are going to depend upon when various things happened eg should this have been disclosed in the contract
e. what instructions did you give your solicitor/conveyancer; was the property advertised as being suitable for development
f. once you've got a handle on this you need to consider whether you can develop and amke a profit even if different to what you ahd hoped; whether you can resell as is. Look at what provides the best solution for you – this might mean that even if you have an arguable legal case against someone the time, money and stress of taking action means you miss out on other opportunitiesHow much other property is being developed and will hit the market before yours or at the same time? what are other sales like in the area? You can make a lot or you can lose a lot.
Try the Self Storage Association of Australia website for some information
Do you really want to get 34 rate assessments? That's going to increase your operating costs considerably.
You don't say whether you have insurance. If you have insurance you should refer this straightaway to your insurance company.
Freeing up cashflow by paying HECS isn't as easyas it seems eg if you paid $3000 off the HECs debt, you would not reduce your HECs payments by 10% as your annula hECS paymnets are determined by your income. Are you looking at converting your hiome into an investment property at some time. If you are then you should set up an offest account rather than a redraw
The important aspect is that the minutes show that the property has been purchased for the trust. In NSW and Victoria from my experience the legal title is held in the name of the trustee without any reference to a trust. It certainly used to be in NSW that if the contract of sale referred to ABC Pty Ltd as tustee for XYZ Trust that double stamp duty was payable. Not sure whta the position is now.
Geoff, you're registered for GST so that's fine. Wayne is not registered
In the standard NSW contract the Vendor has to state whether it is a GST free supply or whether it is among other things the sale of a going concern. The contract then says if the sale is of a going concern and the ATO serves a letter on the Vendor stating the Vendor has to pay GST on the supply the purchaser must pay the amount of GST. For a going concern both the purchaser and the Vendor need to be registered, then there are other matters to be satisfied.
My recollection is that it is illegal to claim GST when you are selling unless you are registered for GST. The real issue is that Wayne is not registered.
Wayne's real issue is will the ATO say he has to pay GST on the supply.
you will need to talk to a good accountant about the 'going concern' requirements.
You're not understanding.
Sell vacant property $450 plus $45K GST, you pay $45K to the ato from the GST recievd and keep $450K your buyer gets $45K back from ATO if he is registered for GST. Net cost to buyer $450K
Sell tenanted property that qualifies as going concern Sale price $450K, you receive $450K. No GST changes hands provided your buyer is registered for GST. Net cost to buyer $450K
Your worst case scenario is you do not register and the ATO does an audit on you and says you owe us GST. You sold for $450K give us one-eleventh. As you weren't registered you can't claim the GST back from your purchaser. By the time they do the audit you've spent the money on something else and one or more of your co-owners can't pay their share, you're the bunny
GST isn't a tax on businesses. It is a tax on the ultimate consumers, but all businesses are involved in the collection process even if they only trade with businesses.
The real issue to you is why do you want to give the ATO the $31500 GST that you have to pay on your purchase when you can simply register and get it back. If you want to give away money recklessly like that I'll send you my bank account details and you can put the money in it.
You know your area so I presume you know who makes up the occupier mix for this kind of property – owner/occupiers or tenants. Yes you're right an owner/occupier will want a vacant property. On the other hand most investors want a tenanted property and the value of the property will be dependent on the terms of the lease particularly rent and length.
As an investor if I buy a vacant property the risk of finding a tenant is mine. It might be vacant one day or one year and I'm going to want that risk reflected in the purchase price.
If you register your net cost is $315000. If you sell for $450000 plus GSt you make $135000 profit. If you get the unit tenanted before you sell you should be able to sell it as a going concern and the Purchaser will not need to pay you the GST or pay stamp duty on the GST. If it were me I'd register. There may be arguments against but I cannot see why you wouldn't want to recover the GST you had paid. If the ATO considered you were carrying on an enterprise and you weren't registered and hadn't either charged GST on the sale or sold as a going concern, the ATO could recover the GST from you and what would have been a nice profit of $100K plus would be reduced to 60K.
A search on victor ollis on this site brings up some interesting reading
https://www.propertyinvesting.com/forums/property-investing/general-property/6635
Do a google search
With all due sympathy to your friend of a friend, you have not described an investment strategy, but a lifestyle choice. I am pleased that financially he can get out of it because of his employability.
He has purchased and initially is paying $400.00 per week interest plus rates plus body corporate plus whatever for something that will return $237.50 a week. I know I will get shot down in flames by some but grossing 3% income on something that is costing 6+% is not my idea of fun. Ultimately capital growth is only going to occur because of increased income potential.
Camden and Dazzling show their strategy. Find something with unrealised potential and work out how to add value.
I wonder what Foundation's friend of a friend has learned from this experience. I know from Dazzling's stories that he learned after his unhappy experience with residential IP to keep on with direct property investment but in a field where the issues he had had wwere minimised.
Horses for courses. I'd want a design where kids didn't need to access bathroom at night by having to wander through the family area. Look at what's attractive to buyers/renters where you want to build. Also with an ageing population it's worth considering wider hallways, wheelchair access, and how easy it is to fit extra aids in bathroom/toilets
You would be able to get a graph on house prices and might need to insert your various events in it. Possibly one that's adjusted for inflation might be more meaningful.
I remember someone saying to me a couple of years ago a company they had shares in had bad news. They panicked and sold, but by the time they did prices had already dropped. I think the company had recovered in its share price when they were talking to me a few weeks later. At least with an IP you've got time to rethink selling once you put it on the market.
Don't confuse CGT and FHOG requirements. FHOG requires 6 month's residence:
"
First home owners grant
To be eligible for the federal government’s First Home Owners Grant scheme you must be an Australian citizen or permanent resident and you (and your spouse / partner) must have not previously owned a home in Australia.
The grant amount varies from state to state. In NSW, QLD, and the ACT it is currently $7,000. In VIC you can claim up to $10,000 ie an extra $3,000 is claimable in certain situations however stamp duty exemptions are not as favourable as some other states.
The government gives you the First Home Owners Grant in the form of cash to add to your deposit and this is usually paid at the time of property settlement. The property you buy must be an owner occupied property and new legislation introduced on 1 Jul 2004 requires you live in the property for a period of at least 6 consecutive months commencing within the first 12 months after purchase. Therefore, there is some flexibility in complying with this legislation and you still may qualify if you
- decide not to live in the property straight away or alternatively
- live in it for six or more months and then rent it out following that. "
Sell the house and start a pension from your smsf while you are still working. the pension would be used towards your interest payments. Get some professional advice on setting this up
