Stamp duty and CGT implications - subdivision victoria

Hi all,

I recently purchased an old house (18 months ago) with my mothers partner (defacto relationship). We have since knocked down the house and have commenced building two very similar townhouses (one is a few sq's more than the other).

Purchase price of original house was 690k, stamp duty was ~30k. Construction/planning costs are about 600k for both. Market value of each townhouse will be around 850k each.

The plan was to own one townhouse each from the subdivision, under separate titles and with his title transferred to my mother (defacto relationship). The application for subdivision has been lodged with the surveyor who is in the process submitting to council.

Will there be CGT and/or stamp duty incurred as a result of this?

 

Probably ...Maybe even GST and tax. Hard to say...Reasons and many other factors could impact. Are you partitioning and then living there for forseeable future ? Will these be your home/s and you retain then and live in them on completion.

Transfer to your Mother will be dutiable and may prevent partitioning. You may need tax advice and a solicitor.

 

Yes. Stamp duty will apply because of a change of legal ownership. CGT or income tax will apply as there is a change of legal ownership and CGT could apply because it is a disposal of new residential premises.

All could have been avoided with some planning.

 

We will be living in each of the townhouses and calling them our PPR for the foreseeable future. The original old house was rented for about 8 months before we built. Will this attract CGT/stamp duty? I trust it will not attract GST?

If it does attract stamp duty/CGT, then what if we transferred each title into both of our names (i.e. both lots are transferred into myself/mums partners names). Will it then be avoided?

 

Yes if you change owners it will be dutiable and trigger tax. GST is unlikely but it will be a possibility.

If you subdivide and keep the same names on title there is no transfer of ownership.

Did you seek legal advice before starting this?
You should definitely seek legal advice now.

 

Mums partner saught legal advice and was advised that the townhouses could be placed under each of our names without any stamp duty or tax payable, but I thought the advice sounded a little suss.

So just to summarize:
- Townhouse 1 under joint names and Townhouse 2 under joint names = no tax or stamp duty.
- Townhouse 1 under individual name and Townhouse 2 under individual name = tax and stamp duty.

If we follow scenario 1, can my mums partner still bring my mother onto the title for townhouse 1 even though I am on it without incurring tax and stamp duty, given they are in a defacto relationship?

 

If the acquisition was for private purposes then the issue of taxes may be reduced. But not eliminated.

You need legal advice - Partitioning .... but that just splits the two owners so each owns one each after subdiv. And the issue may require both properties to be identical. Depends as each state concession can vary.

Adding mum will trigger some issues. I dont see why she wasnt the original buyer. There may be a state concession to add her to the title ONCE it is complete so its 50/50 with her defacto.

Legal advice is needed.

 

Perhaps the land has been partitioned already. I'd go back to the original lawyer and seek clarification.