Stamp Duty

Viewing 6 posts - 1 through 6 (of 6 total)

not_so_lucky
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@not_so_lucky
Join Date: 2008
Post Count: 121
January 25, 2013 - 9:21 am
If person A owns a property, in which he lived for a year. He then rented it out for two years. He then knocked down the house and subdivided the block. He asked his builder friend to build two units, one of which he would sell to his friend for "very cheap", and whatever the profit is at the end after selling both units they would share.
Person A would like to minimise the Stamp Duty which is why he is going to sell one of the blocks to his friend for "very cheap". My understanding is, that even if you only receive $50 for the sale of your house, you must pay Stamp Duty based on the market value. Is this correct?
crj
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@crj
Join Date: 2004
Post Count: 618
January 25, 2013 - 9:58 am
Bear in mind that once the block "sold" to your builder mate will not be covered by your PPOR CGT exemption, so your cheap block could cost you money in tax. You need professional advice on how to set this up most effectively
not_so_lucky
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@not_so_lucky
Join Date: 2008
Post Count: 121
January 25, 2013 - 10:13 am
Thanks for that.
Because of the generous FHOG for brand new houses, they are both planning to immediately sell the units. They are both currently renting. Will they both have to pay CGT for the sale of the house? And the person who sold the block to the builder will also have to pay CGT on the sale of the block as well. Is this correct?
crj
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@crj
Join Date: 2004
Post Count: 618
January 25, 2013 - 10:55 am
Get professional advice, don't rely on a forum. I have shown in my previous post some of the issues you need to make sure your adviser considers. Your builder mate won't pay CGT, he will pay tax on his profits because he is a builder. You need to consider GST too on the sale
Terryw
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@terryw
Join Date: 2001
Post Count: 16,213
January 25, 2013 - 1:19 pm
A miight be better to sell the land to his builder friend after the house has been knocked down because the value would be lower – probably wouldn't work out if you were intending to finance it etc.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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not_so_lucky
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@not_so_lucky
Join Date: 2008
Post Count: 121
January 26, 2013 - 4:06 am
Actually, I think that's what the plan is (not 100% sure). The block will however be paid in cash…