Hi,
I am new to this forum.
I have a property in Victorian south east suburbs. My retired dad currently lives in the property so it is considered an investment property but I earn no rent from the property.
I am hoping to build two units on this land. I would like to keep the front in my name but subdivide and transfer the back unit to my dad for him to live in. But the bank will only give me a loan to build the units if the land is in my name as my Dad is retired.
One of the lenders I met suggested subdividing and selling off the plan to my Dad during the foundation stage. As per him, I can wait till after the build and then do the actual transfer at that point. This should reduce my tax liability.
Would you agree? When I spoke to the council they were talking about a section 173 – is this related?
Thanks heaps.
Ideally, it would be good to get one block in your dad's name for the CGT exemption (assuming no other property owned). But being retired it will be difficult for him to qualify for a loan. There will also be stamp duty to transfer and CGT implications for you.
The best time to reduce the stamp duty would be to transfer when the value is lowest – it now or when house demolished (if).
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
One strategy may be to add dad to title now. Then build and subdivide splitting the blocks on completion. Stamp duty on the way in, but only half of the value at that time. On sub-division it is possible that not stamp will be payable but this must be set up properly up front using a deed of partition.
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
A Section 173 would be required if part of the property is to be sold before the subdivision is completed.
In the simplest terms, it is an undertaking to complete the subdivision in line with the Town Planning Permit.
Hi Terry and Christian,
Thanks for the replies.
So is selling off the plan (with no actual land transfer until after build) at foundation stage not an option? Also, would a section 173 be required with an off the plan sale as the building of the units will be still my responsibility and hence should not affect the council.
Regards,
Kunal
Selling off the plan to your dad would be an option. It used to be that off the plan sales were assessed for stamp duty on the value of the land at the date of the contract – ie with no house. Not sure if this is the case.
Another option is an installment contract where your dad pays you month by month over 30 years. It is possible to reduce the tax paid b this method. Stamp duty is payable upfront in Vic I think.
I am not sure about hte planning side.
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
If you are not settling until completion this is straightforward.
You enter into a contract to sell that which is described in the TPP.
Stamps are payable on the value at the time the contract is entered into – thus the benefit of sale off plan.
Thanks Christian and Terry. I think we will try with off the plan sale first.
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