Can you tell me if I sell my PPOR with a DA in place do I pay CGT? I was planning to develop it myself but the zoning is changing and I have received 3 letters in the past 2 weeks from developers offering to buy my property as they've obviously caught wind somehow that the zoning is about to be amended. Just curious to know if there's anything I need to know before making any decisions.
It would depend on many factors. I would be seeking personalised tax advice concerning all those factors to assist your choice.
I've just spoken with my accountant and he said there's no CGT applicable... I hope he is right. We bought the property almost 3 years ago and have lived here the whole time and it is in our personal names so fingers crossed the advice is correct.
That would likely seem correct. We often encounter people who seek to stretch the facts and have just acquired, not really established a main residence, have dual properties etc. 3 years certainly seems like a CGT asset relating to a main residence. This also likely means the GST situation could be averted. GST on sale of premises wont apply to existing residential. And if you arent conducting a enterprise. So its important you dont conduct a enterprise but sell as a mere realisation with the dwelling insitu etc. Tax free. Kaching. Of course a property savvy tax adviser may have also assisted with guidance on the alternative position. Selling to a developer as a JV or developing the site themself. Then you can weigh up a high sale v higher taxes etc. And whether you want the risks. A DA or not wont influence the value much esp if the land is capable of use with other neighbouring lots to multiply density. It could even be a waste of $$$. The capability of a buyer to use the land is more relevant. A good developer linked agent is best to guide. eg Fred & Betty own a 1200m2 lot incl their home. New zoning allows greater density maybe 4 townhouses. As a large lot with that capacity the agent suggests a sale price of $900K which is $100K more than sale as a dwelling. However JillDev Co Pty Ltd seeks to buy four adjacent similar lots. They know 4 lots can be used to build 23 townhouses. They value each lot at $1.2m to get all four lots. Fred and Betty also meet with their neighbours and realise that they all coudl develop the 23 t/houses and acheive a final sale of $2.4m before taxes but consider all the factors, delays and risks and tax issues and decide to allow the developer to buy the home and walk away.
@Paul@PFI Yes, we've considered many scenarios and my accountant has given me feedback on each (I think I've driven him crazy with all the questions). These guys writing to me asking me to contact them could just be hoping I'll sell not realising the actual value in my land but who knows? Just thought Id get some advice before I call any of them. If I can't get the price I want then I will be selling the property to a company structure and carrying out the development myself however, the prospect of selling lock stock and barrel to someone else and still walking away with a decent chunk to be mortgage free especially in the current climate is tempting. The fact it will be a tax free sale is a big draw card for me. I should add, the biggest lesson I have learnt along the way is how hard it is to get finance for your first development. I'd have to look upon this sale as a way to allow me to carry out further projects down the track a lot easier.
Depending on the scale of the dev it could be commercial finance which can be quite expensive and far far harder to obtain without dev experience. Lenders see an incomplete dev on land as a worst case problem. Almost unsaleable. Worth also exploring your capacity for finance as it can be a deal breaker and guide a decision. I have seen many who think their equity in the land alone will suffice and it may not. And often those unsolicited offer will want to deal with a option with you being paid far later. You are basically handing the land use to them and then exposed to financial risks of completion. Legal advice on that helps. I have seen many get excited to realise its not as rosy as it initially sounds. One recent case collapsed when their lender refused the option deal as a risk to their mortgage. They were then forced to sell the land by contract for a lesser price
Capacity for finance is my number 1 reason for entertaining the possibility of selling. We're currently in the process of getting finance for the original 1:4 development DA approval and it has been a roller coaster so I can imagine it will be even tougher to get finance for the 1:8 development. We are using a broker and they're dealing with Westpac Business Banking and the initial outlook is good but not a done deal yet. There are other options for finance outside of the major banks but with that comes higher fees and rates etc so we will await the decision from Westpac first. We apparently fall in a difficult bracket for lending because most banks class a 1:4 as a commercial project but they won't entertain lending under 5 million... we need $950k which is our current mortgage and the civil costs. The GRV for the 1:4 is around 2.1 million. Awaiting a commercial valuation from Westpac at the moment. They sent out a valuer 2 weeks ago but it was a resi valuer so that's delayed us. Banks are very slow at the moment but given the new zoning coming in to play I'm not in a hurry. We started the finance application before being advised of the amended planning coming into effect. I would only sell if it was a straight sale, I'm not keen on any complicated offers from developers. I really appreciate your time giving me your feedback. It's good to bounce ideas and hear different views. Noone I know shares my interest in development and properties so I'm glad I have this forum.
There are a few threads on here about RAMS doing 4 on the one title under residential lending, not sure how that has help up under Covid though. @MTR what are your thoughts?
Thanks, I just tried to search but couldn’t find anything. I’ll have another look. I did ask on here about it last year but the general consensus was it was a commercial loan.
