How to spread a sale over two financial years?

[wylie]

I was speaking with someone who knows we have a double block, who told me that a vendor they knew wanted to sell a similar double block to a developer. In an endeavour to spread the sale over two financial years, they asked for one block to be sold end of June, and the other block at the start of July.

I have always thought this is how we could sell our block, if we don't build on it ourselves.

This person told me that the developer buying the two blocks wanted to ensure both blocks were tied up, so the contract on the first one stipulated somehow that the second block would be sold. I don't know the wording or how this was done. I don't know if it was some sort of option either. This story came third hand.

However, the end result was that it backfired and the ATO treated both sales as having the same date, or treated them as one sale, i.e. no saving was made by trying to spread the sale over two financial years.

I guess this makes sense because any developer wanting both blocks isn't going to risk tying one up without an assurance of getting the other.

You would think though that you could sign one contract on 30 June without tying it to the second one, and if the vendor doesn't sign the other contract on 1 June, then the purchaser pulls out of the first one.

Any thoughts on this?

If we don't do our build, I don't want to sell both in one financial year if we can get around it somehow, legally.

We hand over so much in stamp duty, land tax, income tax and capital gains tax already.

 

[evan1875]

Hi Wylie,

I have had a similar situation before. I was the buyer of a single house but the elderly vendors wanted to spread the CGT over two different years when they decided to sell several of their holdings.

They wrote an option. I paid $10 for the option and exercised the option after July. Minimal hassles apart from a few months into this and close to the time of the option period they actually saw the rising market and saw they could sell for more to someone else. They started whinging about not happy selling (they shouldn't have because I quickly put a caveat on the property).

Sell one block to the developer and give him the option for the other.

But one of the accountants will be able to tell us whether the option date or the contract date is taken into account here. Just saying this has been done.

 

[neK]

Perhaps sign on the contract for IP1 on the 30 June 2015 that has a cooling off period of 7 days and have the 0.25% fully refundable with a 7 week settlement.

Then sign the IP2 on the on the 7 July but with no cooling off with a 6 week settlement.

Does that work?

 

[Paul@PFI]

Careful - Tax appeal cases are littered with disputes about when a binding agreement was effected.

One of the easiest ways is to NOT make a contract. The transfer date then applies. However would you both trust each other ?? So you contract one (the earlier date) and then don't contract the second until after 1st July. You just have to agree to trust each other.

 

[pinkboy]

Whatever happened to 'pinky promises'?




pinkboy

 

[Scott No Mates]

Whatever happened to 'pinky promises'?




pinkboy

Only you can make it legally binding.

 

[neK]

Careful - Tax appeal cases are littered with disputes about when a binding agreement was effected.

One of the easiest ways is to NOT make a contract. The transfer date then applies. However would you both trust each other ?? So you contract one (the earlier date) and then don't contract the second until after 1st July. You just have to agree to trust each other.

So if you allow for the first IP1 to be signed with a 0.25% deposit that is fully refundable, wouldn't that potentially give the other party confidence that they could cancel without any financial penalty in the event you don't proceed with the sale of IP2?

Or is there something that catches a person out?

 

[Scott No Mates]

Two adjoining sales contracts in close succession can be viewd by the ATO as a single sale or related sales events.