Company for purchase and development

[shorty]

Hi all

A scenario was suggested to me today, just interested if anyone has done it (or thinks it can't be done).

Two people set up company with 50/50 ownership of company. Company purchases property and develops four townhouses. At subdivision, a deed of partition is used to transfer titles of subdivided properties to personal names of company owners (2 each). As the interest in the properties is essentially the same before and after subdivision no stamp duty is payable (VIC) , and the company can claim the gst credits for the development.

Any thoughts?

 

[Scott No Mates]

The directors and the company are two different entities, the interest of the company and the directors in the properties is totally different (not anything like prior to subdivision) - why would you even think that there would be no stamp duty?

To put it in simple terms:

Pre-subdivision - 100% company owned, 0% personal
Post-subdivision - 0% company owned, 100% personal

The directors aren't the company so are not the same as the company.

I assume that the directors are 'buying' the properties from the company so the GST inclusive price is paid, the company pays the GST on the margin scheme and also pays tax on its trading profit at 30%

 

[soggy]

I believe any sort of name change or ownership percentages wil trigger stamp duty.

You could buy under personal names with the partition agreement but you would need the subdivision plan at that time listing who gets what. That might mean no room for changes on the subdivision sizes etc.

Gst for the development can be under the margin scheme under the personal names, so no gst credits are wasted.

 

[shorty]

I thought it sounded too good to be true. I appreciate the comments.

Cheers

 

[Terry_w]

Yes change in ownership from company to persons = stamp duty. It migh be possible to avoid stamp duty (or nominal) if the titles are transferred so each company will end up with 2 units each.

 

[Paul@PFI]

Partitions only permits JT or TIC to become individual titles. The rules vary slightly in each state but basic requirement is the A & B are TIC or JT in a fixed share immediately before and will become a individual title in same % after.

The rules under the duty exemptions in each state are very clear. Companies are not included. A shareholder cannot own a right to company assets and hence cant enjoy any right to company title. The only way a shareholder can become entitled is by way of a dividend or return of capital on winding up. So no partition.

Potentially double duty too if you try.

A company consolidation entity cant do it either. I have given it thought in past. State law doesn't recognise the consolidation group.

 

[Paul@PFI]

Hi all

A scenario was suggested to me today, just interested if anyone has done it (or thinks it can't be done).

Two people set up company with 50/50 ownership of company. Company purchases property and develops four townhouses. At subdivision, a deed of partition is used to transfer titles of subdivided properties to personal names of company owners (2 each). As the interest in the properties is essentially the same before and after subdivision no stamp duty is payable (VIC) , and the company can claim the gst credits for the development.

Any thoughts?

The building entity can claim the GST BUT GST is also payable on the sales at market value !! as its new resi and associates dealing with each other. Margin scheme may also reduce the impact of GST on the supply if the deed correctly addresses GST. The new owners will pay GST they cant claim (input taxed). Partitions are a gst supply and create a funding problem.

That's said see other post that IMO a DOP cant work

 

[shorty]

Thanks Paul and Terry. I think we will keep it simple and purchase as tenants in common under our personal names, then use a deed of partition at subdivision.