Structure of Development for Tax advantages for Investor

Discussion in 'Legal Issues' started by Ray-Rom, 24th Sep, 2018.

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  1. Ray-Rom

    Ray-Rom New Member

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    Hi All,
    We have an opportunity for a family member to buy into our property on a 2/3 basis. ie. She builds the 3 apartment complex and gives us 1 apartment for free as well as paying our mortgage off. Its in blue chip suburb of Melbourne.

    How best to structure the project so that she gets the maximum tax and investment benefits as they will be her investment properties.

    Much appreciated
     
  2. willair

    willair Well-Known Member Premium Member

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    This is not from the Tax side,but why not just split the block ,and keep the title in your name..Or have a very solid exit clause that you both understand..
     
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  3. Terry_w

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

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    Get some legal advice.
     
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  4. JDM

    JDM Well-Known Member

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    You should have a development agreement that clearly outlines the obligations of each party. The fact that it's family makes this even more important. Having things in writing can avoid fights and family fallout in the future. It also deals with things you might not have considered and also what happens if something goes wrong.

    You will need specific legal and tax advice to ensure you structure the deal correctly to minimise tax and to ensure you don't lose the benefit of any capital gains tax concessions or exemptions.

    Will she be taking a mortgage over the property to assist with funding the development? Is the project approved? Can you subdivide your home off early to keep it separate from the rest of the development? Who decides which of the three units you get? Will your unit have marble or laminate bench tops? What if she can't afford to finish the project part way through? What if the builder goes broke? What if someone dies on the building site?

    The above are just a few of the types of things you should be considering and documenting now.
     
    lixas4 likes this.
  5. Terry_w

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

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    It might be better if she lends you the money to complete the project so that stamp duty and CGT are avoided until the end

    Or a Joint venture

    Or sale with deed of partition.
     
  6. Paul@PAS

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

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    GST must still be considered too. Enterprise - Possibly. The very nature of the JV could place any CGT issues well at risk too