Duplex development: Joint venture - PPOR Dwelling for each

I have purchased a duplex site (vacant land) on a long settlement with (*and or nominee) this is partnered with a good friend of mine and we are going for a 50/50 share, as we found this the numbers weighed up and a good strategy to enter the market in owning a property. Currently planning permit is in progress and is looking positive for approval.

Strategy:
- Build duplex and for each of us to own one as our Private Place of Residence

Question is can we structure the purchase of the land and building construction for the above strategy to work?
- Can we use our first ppor/fhog benefits?

 

You will need a deed of partitioning to separate the ownership of the different parts of the land.

Also consider an agreement to deal with the bad times.

 

Yes but you have already entered into a contract so not a good start. You will need legal advice on stamp duty an d setting up a partition.

 

Thanks guys for the info, Terry even though I have entered into a contract but I have put and or nominee on the contract also a longer settlement than usual. Could the above deed partition still can happen?

 

Yes, but you need advice on stamp duty. It might trigger advalorem duty again.

Why did you enter the contract like that?

 

Off market sale, had to be in by 9am or would have been sold to the next person =(

 

GST will also be impacted and if you bought vacant land the margin scheme may not apply which could add to costs. Think of this dilemma....The two guys own the vacant land and build houses and then sell a part of each lot to each other from a different entity (Partnership). This maybe a GST trigger - It seems like its a enterprise that expects to make taxable supplies but has elemenst of it not being one - Just you didnt expect it !! This seems a poorly executed plan. If tax and legal advice had been obtained first it would typically recommend something different to what has occurred.

Depending on the state it may be possible to seek OSR concessions to treat the land as partitionable with or without duty. A stamp duty legal specialist in that state would be my suggestion. But the bigger issue may be that if the land cant be subdivided or strata you have a bigger problem. You cant split what council wont allow to be split.

Problem will be if council does not permit strata titles you both end up with financial liabilities to each other forever as you are then both owners of each portion of the build which remains on a single title.

 

Hello,

It seems that the universal response is that a deed of partition is necessary and still a possibility.

You need to engage a professional to draft this document and consider local stamp duty laws. If you do that their is a good chance you will get what you want.

Don't forget to consider how you will deal with each other if things go bad. But your current pressing issue is a deed of partition.

Thanks.

 

I would be quite concerned with a deed of partition to be honest. Its a GST issue. Its a complex legal issue and can be avoided in some cases but I wont discuss how as its complex legal advice.

I dont get trying to reattach a leg that you cut off and ask how to glue it back on. Glue may not work.

Skipping advice on day one comes with a consequence. Get legal advice and it will be costly but possibly find a outcome. My thinking is a trust issue - Way too complex to describe but with you have croossed into a complex area. Perhaps the parties hold interest as nominees and as apparent purchasers. Drafting a documnet will taint this but each party may evidence trust charecteristics. If that fails the unwinding is equally as complex and can trigger tax problems.

 

What state?

Related to your friend?

 

A friend who may also be a spouse would also be important. Laws dont differentiate between "Friends" and spouse in some cases. I wish I had $10 for every client who suddenly divulges their friend is a same sex partner. This has a massive tax impact as tax laws see parners like married couples despite marriage always being legal. I see a major tax avoidance opportunity some same sex relationships seek to exploit (deliberately ?) and now I am wary.

 

Marry the friend? Could Part IVA apply?

 

And for duty purposes - There is an anti-avoidance rule with duty in most states too.

 

We are both in Victoria

 

Duty might not be chargeable a second time - assuming the land is also in Vic. Seek legal advice.

 

Not directly related to my friend (genuine friends from uni days)

Would to say thank you to everyone above in responding, love this forum!

 

Hi klabat - interested to find out how you went with this as I'm looking at doing something very similar in Vic.

Were you able to manage the stamp duty position and was GST in fact an issue?

 

I think the crux of the posts above was he was needing to unscramble a partly scrambled egg. If you are 'looking at doing' rather than 'have done' (or started to do) then get advice up front, understand your options and set off on the right foot. (I have zero idea of what the right foot is btw).

 

GST should not be a issue where both parties are intending that the two lots will each be a main residence with no foreseeable intent to sell. Caution must be given that a later sale could indicate some elements of a enterprise and then the sale could be liable for GST.

 

Hi @klabat I am just wondering how did this go? I am also thing to something similar. Just thinking now and very curious to know your experience. Is it a thumbs-up or down? I am more concerned about the financials like how the mortgage liability split, registering each one of the duplex to each other's name, stamp duty and any GST complication...etc Really appreciate if you could shed some light here. Thanks