Prospective 4-TH development, land in personal names

I understand that they have been quite a few threads discussing the cons/pros of owning properties in personal names or company controling a trust etc. When I started looking into property investment a few years ago I didn't expect myself to be heading towards development this soon. Although when I purchased the properties I considered future development potential, the uncertainty of me going towards development and the cost/complexity of running company/trust prevented me from buying in company/trust name.

Now I am thinking about doing development on one of my properties. I felt that the benefit of having a company/trust owning it seems more obvious. Yet I am not ready to spend 20K to get the names into a company/trust.

I would go and seek personalised suggestions for sure. But just wondering about everyone's opinion on how bad it is (risks, potential tax issues, etc.) to have a 4-TH development in personal names. Strategy is build and hold.

Many thanks for reading and your inputs.

 

If you transfer the property to a corporate trustee ownership model, you'll likely have to pay both stamp duty and capital gains tax. It could be a lot more than $20k.

Ask yourself why it's really necessary to do this and talk it over with your accountant.


Just a thought. You might be able to transfer it to a trust with the current owners of the property as the trust and trustee. I seriously doubt it could work, I imagine the trust would need to be in place prior to the property purchase. Worth asking a few questions about it though.

 

The transfer costs of GST, tax and duties may make the change of ownership unviable. Its worth considering each option and determining what the impact is for various scenario's. Its possible that the final project may have a very significant annual neg geared impact when interest and depreciation deductions are considered and personal ownership may even be quite sensible since trusts would find the loss captured and of no value. The asset protection hazards and risks are also worth exploring (legal advice)

This is a area where early advice may avoid very costly mistakes.

 

Development is one of the riskiest things that you can do. See how many projects fail and how many developers end up bankrupt.
This would be extra risky because there are 4 potential bankrupts.

There is a simple way to reduce risk. Appoint a company as trustee - no CGT and no stamp duty (or $50) is possible. Structure the company so that one person gives a guarantee.

If it fails it will still be painful, but the lender might not be able to pursue the other 3.

You need legal advice.

 

Wow, I was just thinking about potential cons/pros of personal names and company/trust. After reading the replies I felt that I might just cancel the idea of developing... At least for now my properties are gaining capital and positively geared...

 

I believe the correct approach is to evaluate each option as a business venture - after all it is a multi million dollar issue / risk/exposure. That means a budget based on reality. Not just quick beer coaster calcs. The number of people who think development = profit is astounding. They start a monster they cant manage and it bites them. It will also cost more, take more time and always have some issue occur. Can you afford or choose to lose $100K, $400K and destroy your credit rating as a consequence ?

One of the options of course is to sell the land with a DA and the old house still on it. CGT likley applies, No GST (?) and a developer who wants the risk can bid for it. You walk away.

 

Don't be too hasty to throw in the towel!

work out what could go wrong, what the effect is and how to minimise these effects.