QLD - parents purchasing IP with plans to demolish and split property

Hi all

I'm hoping to seek some guidance on a scenario I'm involved in. I've searched through some posts (particularly Terry's) and am posting on my own personal situation to help me decide on how to proceed and education myself on this process as I'm getting somewhat confused with what I've read so far.

Scenario:
My parents and I have been successful with our offer to purchase an old house for $1.3m.

- House in QLD
- Already on two identical lots
- Intention is to rent out property for 1-2 years maximum (while drawings/plans are drafted)
- Future intention is to demolish house and build one house on each lot (A and B)
- My parents may either move into A or sell it
- My wife and I will move into and live in B (not my first home)

At this stage, our thoughts are for my parents to purchase the property as is, then eventually demolish and build property A, and "sell" property B to my wife and I.

Our accountant seems to believe that the original purchase should be both my parents and my wife and I (i.e. the property owned in "quarters"). The purpose of this is once the application goes to council, my parents "sell" one lot to my wife and I, and that approximately half of stamp duty is applicable (compared to if my parents owned the whole property and then sold one lot to me).

I'm just not 100% confident in the accountants advice. Does anyone have a differing opinion or general advice on the most appropriate/efficient way of structuring this?

Funding isn't an issue, though my personal preference would be for my parents to be the sole owner at this stage, though I also need to be mindful of CGT implications for them.

 

That sort of advice should come from a lawyer. Generally you would want the final owners to purchase now, partition the land and later transfer title to each without triggering duty or CGT. Try certus legal as they have experience in this area in QLD.

ANother way is to immediately enter a contract with the parents triggering CGT event B1 - with no tax payable as no value increase. But duty would be payable I think.

Also consider how to structure the loan.

 

Important you get up to speed on the tax issues. Why cant each party acquire each of 2 lots ? Avoids duty issues, tax issues, GST issues and CGT and as Tery points out finance issues. Your parents could be liable for your debt and you loable for theirs if its not structured well. There is also partitioning and more that involves legal advice for sure. Often these sorts of q's concern minimising tax when it may do the opposite.

I would also consider Darryl Richards at Certus.

 

It also might be better for the parents to own the lot. Some asset protection, estate planning and tax advantages.

 

Provided it has one dwelling. Once any change occurs this could impact. A related party sale at market value likely easily achieved, no GST. Some tax. That other portion later sold will revert to the position as it was never the main residence land. But the subdiv costs may impact the costbase and reduce the CGT issues. And third element costs.