Land partitioning

Hi everyone, thanks for making this a very informative forum so far.

if I could ask a few very newbie questions; posted elsewhere but thought I'd get some more ideas in a new thread.

My sister and I have been offered some family help to buy a house on a large block of land that we could potentially subdivide down the track (make into two houses, each either PPOR or IP). Until then the house itself will be an IP.

I realise the difficulties with joint ownership, eg with regards to our future serviceability calculations.

1) I was wondering if partitioning early would help us avoid this difficulty? So we could get one loan each for our portion without being on a joint loan.

2) would it be silly to partition a piece of land with a house on it seeing as it may be 8-10 years before we develop it? Ie would we end up with something silly like owning half the house each?

3) could we partition the land but not the house on it? If possible how would the loan and mortgage be structured? How about the rental income?

Thanks in advance.

 

1 .no it wouldn't help immediately because title for the land would be in both names.

2. no

3. no

 

Ok, thanks Terry. I've just had a look at your joint buying tax tip #111. so in this case would we be buying as TIC with an agreement to partition at the completion of subdivision down the track?

I will seek professional advice as well.

 

I don't know what you are intending to do.

But you would probably want to partition upfront to avoid extra stamp duty.

 

One issue to be careful of is GST. Partitioning is a taxable supply.

Revenue Ruling No. DUT 035 | Office of State Revenue explains the OSR position
http://law.ato.gov.au/atolaw/view.h...oods and services tax&c partitioning of land; explains the ATO position

 

Sorry if my original post wasn't clear.
1) sister and I plan to buy a block of land(~800sqm2) -we'll borrow what we can and family member will help with shortfall by gifting

2) we would not build on it now as we're both still establishing our careers but we may do so in 8-10 years and create two units, one for each of us (PPOR)

3) until then the existing house on it would be rented out

4) we may decide to just sell house earlier and split proceeds without building.

5) I think if we subdivided and built the units they would not be likely to be rented out. But if they're eventually sold I suppose the GST applies here?

All fairly hypothetical at this point.

 

Are you really sure you want to jointly own a block of land together for 8-10 years? It's a really long period of time, and plans change - especially in terms of where you and your sister might want your PPORs...

 

GST would likely apply if you construct and sell. The margin scheme may reduce it.

 

Yep this was a consideration. We wanted to be near family and each other, but at the same time did realise that we may end up looking for PPORs elsewhere, and decided that one could sell to the other, or both sell in order to fund PPORs elsewhere.

Thanks for pointing it out though, it can be tricky.

 

Too tricky for my personal tastes. Judging by your username, you might be around 23 years old?

Just as an example, I'm 31 now and 8 years ago when I was 23 I had some ideas about where I would be and what sort of career/living situation I would be in once I hit by 30s...

...all completely out the window now and I now would not be doing what I've doing now without the flexibility of renting and being able to use my capital for my own investments.

 

Thanks for sharing thatbum, just curious what did you end up investing in initially? Equity/property or a bit of both? Or something else?