Building townhouses on PPOR

Hi all,

I have a client who wants to build 5 townhouses on his mother's PPOR, all with separate titles so his kids/brother can have one each, and is happy to involve his SMSF for the build (I said no on that one right away).

I cannot see how this can be structured ie. what entity owns these units, if they are to be in individual names once built, and there are also GST implications obviously.

 

What does his mother think?

 

You say 'you have a client'. What is your role in this?

 

Yes, a client has asked me and as I do not specialise in property tax, I am researching.

I am not sure why it matters what my role is, have I missed the point of this forum?

 

This sort of advice would need to involve legal and tax advice.

 

1. Is it possible - ie engage a town planner/designer to confirm whether zoning will allow it
2. Ownership - will it be sold before/after subdivision ie transfer titles of separate units to siblings etc?
3. Pension - will the mother lose pension etc for this (not necessarily a bad thing)
4. Will mother retain one/more of the town houses?
5. etc as per @Terry_w

 

Of course not. This forum exists for the specific purpose of giving you advice for free that you then charge your clients for...

 

This is factually impossible under tax law.

You cant maintain a main residence exemption after moving out of the FORMER home. The SMSF is likely to breach super laws. There also may be a isolated profit making intention and enterprise in this. The use of family to claim a false future main residence exemption is a matter that is ringing alarms for me. It may involve no main residence, GST and full tax on profits etc

I would be starting with personal advice. Mum will also need independent advice as what may help family may punish her as land owner.

 

How do you build on some else's land

 

https://thewest.com.au/news/wa/builder-sues-over-house-on-wrong-lot-ng-ya-377172

 

I dont see an impediment in tax law where it is intended. But I see problems. Many.

Mum may have a costbase that doesnt include the build costs but there is a deemed supply by a partnership to HER of the market value of each build. And then she will make taxable supplies to each child (enterprise ? ) and thats also dutiable as it involves land transfers. Mum (land) is acting as partner to a partnership. However I suspect mum will share a far far higher tax burden than anyone else and then there is a stamp duty problem that is a concern and partitioning will be a problem to avoid it. The land is NOT and cannot be a partnership asset. (Partners can own land, not a partnership as it is not a legal entity) but only Mum owns the land and since its not her main residence and is a element to what seems a enterprise (??)

There is a tax issue most likely on the build (TO MUM by partnership) not the supply of land and build to each family member) and that makes the whole arrangement a potential enterprise issue with taxable supplies and more. And THEN mum will seek to trannsfer to kids and that taxable and also dutiable and subject to GST (maybe!!). The GST at this point may be abvoided if there is no "enterprise" by mum - ie for all kids to benefit ie love & affection....BUT
What those kids all then do with their property may mean there is a taxable supply from mum to kids and none of them get a main residence exemption too. eg Are they all conducting a enterprise to attempt to access multiple main residnce concessions but it is a profit making entrprise by all of them ? If kids sell thats easily argued. And avoidance based views would be high.

And then there is Part IVA.

This is a TPB bomb as I read it.