I’m thinking buy a really old house, knock down and build two. If I buy the property only in my name (loan in my name only) and my friend pays all the construction cost etc (cash fund). All the expense will be 50/50 eventually. Once finish building, I will have one and he will have one. I understand once transfer the title, he will have to pay stamp duty ect. Do I have to pay CGT? If the answer is yes, is there any way go around it? Thanks!
Typically the arrangement is where both parties acquire the land in joint names and ensure a deed of partition applies. See a solicitor to address that. There are various issues to be concerned with during the build as you are each jointly and severally liable. They can also address any duty and first home issues. The first home stamp duty concessions may be available in some states. The partition is a GST supply but to the extent there is no enterprise then GST may not be a concern. Both aprties acquire a CGT asset - a main residence. However there can be concerns if either or both sell to realise a profit. Then the ATO may consider it was an isolated profit making intention and GST could apply to each sale. Legal tax advice should consider this.
If you set it up like you describe then CGT would be payable and stamp duty. There are about 3 different ways this could be set up to avoid CGT and/or duty on the eventual transfer. The parties need to seek their own legal and tax advice on this. One way is to use the main residence exemption, the other is with bare trusts, another is with a deed of partition with joint owners, and then there is marriage.
Thanks Paul and Terry. So it can be done without paying CGT. Will definitely speak to my accountant and lawyer.
