Wow - you have gotten yourselves into a bit of a pickle.
When you get in front of your good cheap accountant (not me) here are some things to discuss:
1. You have purchased the property in the names of one brother and his wife, but you want to distribute profits among the 3 brothers. Generally speaking income from property is split as per the title holding. So how do you tax effectively get the profits out to the 3 brothers?
2. You have indicated that this is purely a business venture - to subdivide and sell. As such is is an enterprise for GST purposes and you may be required to register for GST and GST may apply to at least to the sale of the new house because it is classed as a "new residential premises". The existing house (fairly obviously) may not be classed as a "new residential premise" and so may not be liable for GST. Can you take advantage of the "margin scheme" etc? How is this GST managed?
3. Again because it is a once off business venture and not merely realisation of a capital asset, capital gains tax does not apply. It is purely a nbusiness venture. Therefore all profits will be taxable at normal rates with no CGT discount applying. As per question 1, how can this be done tax effectively?
Now if you meant to say that you will be doing this project as a future investment and will be holding the properties for rental for a period of 5 years or so, then all of the tax issues change dramatically.
That good expensive accountant is going to seem mighty cheap me thinks!
Now here cometh my rant. You have a project of over $1M which will include professions which you will not quibble about such as engineers and architects with charge out rates in excess of $500 per hour. But the one professional who has the potential to provide you with the greatest profit return on investment is your accountant. You have already probably cost yourself huge amounts because you did not get in front of an accountant before you signed that contract. Your choice but I know what I would do.
When you get in front of your good cheap accountant (not me) here are some things to discuss:
1. You have purchased the property in the names of one brother and his wife, but you want to distribute profits among the 3 brothers. Generally speaking income from property is split as per the title holding. So how do you tax effectively get the profits out to the 3 brothers?
2. You have indicated that this is purely a business venture - to subdivide and sell. As such is is an enterprise for GST purposes and you may be required to register for GST and GST may apply to at least to the sale of the new house because it is classed as a "new residential premises". The existing house (fairly obviously) may not be classed as a "new residential premise" and so may not be liable for GST. Can you take advantage of the "margin scheme" etc? How is this GST managed?
3. Again because it is a once off business venture and not merely realisation of a capital asset, capital gains tax does not apply. It is purely a nbusiness venture. Therefore all profits will be taxable at normal rates with no CGT discount applying. As per question 1, how can this be done tax effectively?
Now if you meant to say that you will be doing this project as a future investment and will be holding the properties for rental for a period of 5 years or so, then all of the tax issues change dramatically.
That good expensive accountant is going to seem mighty cheap me thinks!
Now here cometh my rant. You have a project of over $1M which will include professions which you will not quibble about such as engineers and architects with charge out rates in excess of $500 per hour. But the one professional who has the potential to provide you with the greatest profit return on investment is your accountant. You have already probably cost yourself huge amounts because you did not get in front of an accountant before you signed that contract. Your choice but I know what I would do.
Last edited: