Stamp Duty/CGT question regarding a JV development

I am doing a JV with other home owners to build townhouses on our land. Each is contributing their blocks and paying 1/4 for a 3rd party builder to complete the project.

As per the DA, the 4 joined blocks need to be amalgamated before construction which would be a CGT event.

Once the project is completed, each owner will own 3 townhouses on the blocks they originally held. At which point, stamp duty would be payable on each title.

Since i am in NSW, would i be hit with the aggregation of stamp duty rules?

What value is the stamp duty calculated based on since each owner will retain the townhouses in the short term so there technically is no sale? (land+build cost or current property valuation (land/building) plus build costs)

What would be the most cost effective way to structure it as currently have it just under the names of all of the owners (the blocks are basically PPOR for each owner at the moment).

 

Duty prob won't be aggregated unless the owners are related parties.

You need to get some expensive legal advice as there may be a way to minimise the duty and CGT by partitioning the land.

Duty isn't assessed on a sale, but on the transfer of dutiable property.

 

Hi Terry,

Thank you for your reply.

Just to clarify, each owner will retain 3 townhouses, so for that i am guessing that the stamp duty will be aggregated per owner.

I will be ringing around tomorrow to get some more advice on the structure before we start the build.

Will this be triggered when the 4 blocks get amalgamated or when the strata titles are being applied for? Also what is the value the duty be based on?

I was just reading your tips in regards to partitioning, there seems to be GST implications as well? Does that apply if we retain the properties after the JV instead of selling them?

 

Ah 3 each? Yes that would be aggregated.

if ownership changes it will result in stamp duty. You might be able to minimise this thought.

Yes there are GST implications as even with partitioning it could be a taxable supply, even if you don't sell.

Also could be a deemed CGT event even if beneficial ownerhsip remains the same as it is possibly going to revenue account.

Expect to pay about $20k for advice like this. I wouldn't advise on it as out of my pay grade.

 

Does that mean that when the titles are amalgamated there will be duties as well as when it gets strata titled?

How to sell your property development and not have to pay GST

I just read this. Can you see my example below and see if there is anything else i am missing? Will need to talk to the other owners and maybe reevaluate this build.

House + Land = $1,000,000
Build cost for 3 Townhouses = $909,090 + GST
Valuation of the 3 Townhouses at the end of construction = $2,500,000

Stamp duty = $123,273
GST = $227,272 (Minus the $90,909 in GST credits)

All these Taxes and duties are payable even if i dont sell. This just seems crazy.

I guess we were all naive when it came to thinking how simple this would be.

 

Duty could apply when amalgamating because ownership will change.

You are missing plenty of things and need specific and detailed legal advice.

 

Complex area of law. Advice required from a specialist tax lawyer. Suggest denis barlin for NSW