Hi Guys,
My father has 5 acres that is about to be approved to be subdivided into 5 x 1 acre lots. One block is going to be sold to fund the subdivision of the other 4 blocks. My father is going to give one block to each of his kids.I already have PPOR and an IP held in my name. I earn ~$30,000 the wife earns $70,000 and I collect $17000 in rent. There is one mortgage on both PPOR and IP of $290,000.
My question is, how do I structure my finances to maximise my profit from the subdivision and minimise tax while increasing my borrowing capacity to start developing.
My new career in developing needs to take of given the current state of the job market. I’ll never earn more than $800pw. Australia is fast becoming a two class society, and I want to secure my position in the upper class.
Peter
IP and PPOR value ~$650,000. I have no idea what 5 x 1acre lots at Tahmoor are worth, or what it cost to subdivide.
Hi Captain
Firstly congratulations on deciding to take the steps to financial security thru property investing / development.
Have to say your current loan set up is a mess and you should have 1 loan across 2 securities.
I would be looking to get your broker to untangle this and have the loans separate.
You can then look at accessing the equity in the properties to enable you to go forward.
I am assuming your father is going to cover the cost of subdivision so that is not an expense you need to come up with.
I am not sure what you intend to do with the block once it is transferred into your name i.e sell, develop, build upon etc. but once we know this we can advise further.
Going forward in regards to development you are going to be governed by your income and the ability to demonstrate to potential lenders that you can service the ongoing loans.
Before you rush out and give up work to become a full time investor / developer make sure you have financing in place to help you move forward as this could be a stumbling block to further progression.
As often is the case a little more details is need to provide a more structured answer.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi guys… Unless your father purchased the land before Sept 1985, the transfer of the lots to the kids will trigger capital gains tax for your father. Even if there is a house on the land, which has been your dad's main residence, the main residence exemption will not be available where post cgt land is subdivided and separately sold. Most likely, the kids will have stamp duty payable on the transfer of the land to them as well. The tax liability will all rest with your dad. Generally for both cgt and stamp duty, the sale will be deemed to happen at "marker value".
I just sold 5 acres in Tahmoor a few years ago. Prices have been booming.
I suggest your dad seek taxation advice urgently. It could be worthwhile changing ownership now before sub-divison as this could save tax and possibly stamp duty. You should also carefully plan how you are to receive this money – from both a legal point of view (estate planning and asset protection etc) and from a tax perspective.
How you do all this will depend on a whole host of factors.
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
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