Buying un-titled land - possible issues

Hi All,
Need a bit of advice please.
I am talking to an agent about a land in Victoria that is yet to be titled i.e., end of 2017.
The person booked the lot from the developer around 6 months back and will sell it with some profit.
Contract price with developer - $255k.
Sell price now: $285k
The agent told me that the sold price in record would be $255k and any potential CG tax would be calculated on the basis of $255k sell price.
Am I missing anything? I will talk to a conveyancer tomorrow however love your feedback on anything I should be concerned of.
Thanks in advance!

NB: If everything goes OK, this is going to be my 2nd investment.

 

What gain? The price is $255k. If that's the contracted sale price, that's considered the market value. That's what any bank will value on as such.
If you then choose to pay them an underhanded extra $30k in cash for an off the books transaction you could be considered complicit in tax fraud. To the ATO in not enough income/CG tax and/or the SRO in not enough stamp duty for both you and the vendor on-selling the block.
The agent should know better than to try to entice you to commit fraud.

There was a thread on here recently with someone looking at similar.
(Not legal advice)

 

You mean mid-2018 yeah?

My personal opinion is to steer well clear of this type of deal. I sleep better at night knowing that everything is above board!

 

Yes 2 things - logic and proper advice.

If the property is sold for $285k there is a profit of $35k (less other costs) and tax would be payable on this. Not sure what you mean by ‘booked’.


Why listen to an agent about tax matters? And conveyancers cannot advise on this either.

 

The real market price (based on what's advertised in the area) is around $320k and that's the reason I started questioning myself, why? Now I have my answer.
Thanks for your comment.

 

I will do the same - Thanks Simon!

 

I have discussed with my tax accountant and a conveyancer. The conveyancer thinks it's legal and happens regularly. Might need to ask more questions but I wouldn't bother as if there is something seems illegal.
There is a pre-scheduled meeting with the agent tomorrow. I'll update you if I attend and get some clear-cut answer.

 

Its really irrelevant what the conveyancer thinks but perhaps they were referring to the amounts on the agreements and not how you will be subject to tax. What does your tax accountant think?

 

Just found something similar online.
Help resell land whose title is not ready - Real Estate - Home

Interested to hear peoples experience on the following comment:

"This is actually quiet common, especially with Sydney's OTP units where investors will sell prior to completion. The guy from the Bank may not be very experience, but basically what needs to happen at settlement is that u provide the full price, the guy who sold u the land will take his cut, with the rest goes to the land vendor. Everyone is happy. Just gotta make sure all 3 parties are ready to settle, instead of 2.
From the Bank's perspective, all they care is that they will get a mortgage over the title."

Is it really that common?

 

Yes

 

A person can on-sell a property OTP and potentially make a profit.
What you're describing though is that the agent is suggesting that you do a secret side deal so the vendor can pocket the cash difference without tax implications because it won't be noted on any legal paperwork.
I'm only commenting because it sounds like a similar experience I had last year.
I got legal advice in my case. Didn't make the purchase.

 

The tax accountant advised that I shouldn't proceed unless the official sell price is $285k.

 

Does he want you to make a loss on it or to try and hide the income?

 

Thanks Ross again. Your post gave me the insights of the issue. I will talk to the agent and do necessary due diligence check before deciding.

 

Typo Terry, it is $285k. I have just corrected!