Property development structuring for tax

Discussion in 'Accounting & Tax' started by Saki_Chan, 30th Sep, 2020.

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  1. Saki_Chan

    Saki_Chan Member

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    Hi All,

    I've question on structuring of development to plan for taxes. We own property 50-50 held by me and my spouse. We wish to demolish the property and build two townhouses and subdivide. Keep one and sell one. We wish to do the project with cousin brother. Sharing the profits in the ratio of capital invested for the one that we sell. We wish to structure this so to plan for saving on taxes - CGT, GST, stamp duty and land taxes. I'm also hoping to get reference for tax lawyers to get professional advice.
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    whats the question?
     
  3. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Given that the land is already owned why would you want to change that ? It may be wise to PAY the relative for their involvement - They would need a ABN of course. That way their involvement is limited and is non-equity. But how do you structure that ? (A : An agreement) You assume a profit - What happens if its a loss ? Its hard to make profit on a 2 lot site. Especially since only one is being sold. Duty and other changes otherwise would make the development unviable

    Wise to also understand all the tax issues for the 50% being sold. One risk with a dev like this is mixing home and profit making. If you sell the new home withinn "X" years it could trigger GST and tax issues. You didnt mention if it was to be "home" or a IP. Best it be retained longer term so that your intentions show the lack of enterprise applying to the retained portion so that it is a CGT asset. This is something best documented by your tax adviser as a matter of record. Changing your mind later could trigger the tax issues.

    You may find the developer info atttached helpful for planning and costing tax issues.

    One further issue to consider is finance. You and spouse would be the only ones borrowing.
     

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  4. Saki_Chan

    Saki_Chan Member

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    Question - how do we structure the deal, joint venture, trust or company. Sorry posting for first time so not sure how to edit original post
     
  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    That is something you will need specific legal advice on. Its a bit more complex than a one word answer, or even a few paragraphs and will depend on a lot of things.
     

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