Subdivision process and land tax question...

Hi All,

Will soon be commencing the building process for my first subdivision project in Melbourne. My plan is to hold long term, rent out the new townhouse and remain living in the existing front dwelling.

Once completed, I will be hit with land tax the following year (will be 2nd IP outside of my PPOR). Am I able to leave both unit 1 and unit 2 on the same title to avoid being hit with land tax? I can't see anything noted in the building permit regarding the subdivision of titles so was curious to hear peoples thoughts.

I am aware that the end value will be less if the two dwellings are on same title however as I am not planning on selling either in the short/medium term it would be great to potentially delay this process and avoid the land tax if that is a legal option.

My questions below;

• Is there a time-frame from build completion (obtaining certificate of occupancy) to when the subdivision process is to be completed?
• Connection of services (power, water, internet etc.) if both units are on same title. Can this be an issue?
• If I don't complete the subdivision process now and planning regulations change between now and X date, will I run into issues with subdividing the lots later on when I decide to sell?
• Are there any limitations with insurance if having two dwellings on 1 title?
• Any other pro's/con's for leaving 2 dwellings on same title?

Thanks in advance.

Dan

 

I don;t know the VIC planning system so I won't comment on the first few, but in terms of the last two questions:

Shouldn't be an issue in my experience, as long as your insurance provider allows for it in your policy (EBM insurance who are one of the better companies will allow it). Your insurance premium is simply for the value of two dwellings rather than one, when you subdivide you can then split into two insurance policies, which in my case cost exactly the same. I did this on my last development and it was easy.

One thing to consider is bank valuations if you need to extract equity for your next investment - as you mentioned end values will be less so you wont be able to leverage against the higher value you would achieve if you completed the subdivision. The same goes for accessing equity to fund the construction - if you subdivided first you could access finance based on the final project value (subdivided = higher), therefore potentially covering some or all of your construction deposit. This cant be done if you build first.

 

Quick description of subdivision process in vic:
- planning permit for the development to build 2 units

- planning permit for the subdivision (2 years to then get certification of the subdivision plan)

- certification of the subdivision plan (where council and authorities sign off on your subdivision plan- now have 5 years to get statement of compliance and register the sub at land registry or it expires and you have to start the whole subdivision process again)

- statement of compliance (where council and service authorities are happy you have satisfied all their requirements/conditions - this is the final hurdle before you can register your subdivision at land registry)

Services -if you are building prior to or concurrently with the subdivision then you will be constructing all the services naturally during the build. When you subdivide prior to building then the service authorities may require some of their services to be constructed earlier then you'd like, this is to ensure that the new lot will have services available even if you sold the land.

Delaying subdivision - yes there is a risk with delaying the subdivision. New rules occur and you will have to comply. Council may also relook at your development planning permit to make sure it has been complied with, ie landscaping requirements, dividing fences in correct spot to satisfy secluded private open space, etc. So you may have to spend some money to bring the site back up to scratch. Also, service authorities may change there requirements and you may have to comply with the current standards, a good example is now all subs need to have electricity pits installed as they are fazing out overhead connections. A sub 20 years ago didnt have this requirement. Who knows what tomorrows requirements will be?

Title issues - need to inform your surveyor that you will be delaying the formal subdivision. Title re-establishment surveys are not an exact science, surveyors do get different results. A good surveyor will locate all the necessary marks/fencing in the area of your property to get a good picture of where they believe the title position 'should' be. Cheap as chips surveyors will just use the easiest information available which may or may not give the best result, for you or the rest of the properties in your street. When you register your subdivision plan at land registry, your title and its position get 'locked' into place, and other surveyors need to respect its position. By delaying your subdivision you are opening yourself up to possible issues with your neighbours where they get a subdivision completed and their title position gets locked in prior to yours, and doesnt match yours. If you have built on the boundary, such as a garage, you could find that after your neighbour registers their subdivision you may have built the garage in their land. Only in some circumstances is this a potential issue, and there are ways to protect yourself, but you need to let your surveyor know so they can assess and prepare for it if required.

 

Probably not, but always a risk of course. My strong recommendation would be to get everything done now, under current provisions and not rely on them being the same in the future. I had a client caught by a zone change reducing the yield from 3 down to 2 units (mandatory, without recourse...) It's changed back now, but the Council will resist more than 2, "just because"