individual names or family trust for construction

[belleran]

Some advice and experience needed.
I need to make the decision as to whether I buy the next piece of land in the name of our family trust which is registered for gst or in our joint names. We intend to construct a dual dwelling. If we do this venture in the name of the family trust we will rent the dual dwelling for five years before selling.
Doing it in our joint names gives us the option of doing what we like eg. PPOR, selling or renting without having to worry as much about how the ato perceives our intentions.
The land is being sold inclusive of GST at this stage. I am talking with the vendor's solicitor to see if we can purchase using the margin scheme.

The question is which method would give us the better financial outcome?
I can see the "It depends..." answers now. Has anyone else faced this quandry?

 

[Jonathon]

Doing it in our joint names gives us the option of doing what we like eg. PPOR, selling or renting without having to worry as much about how the ato perceives our intentions.

Doing it in your own name carries just the same issues as if you do it in your trust, i.e. the property will be treated on revenue account rather than capital account and paying gst on the sale price, if the ATO perceives your intentions to be to sell the house once built.

From your post you're obviously familiar with the margin scheme, so I'm curious why you think the DT route is different from the personal name route? Perhaps I'm missing something?

Cheers
Jonathon

 

[grossreal]

hi
simple answer is an accountant will tell you.
when doing a development the structure depends on what you want to do withthe end product.
and I would not take that advice from a board
have a read of some of my posts and the start structure is very important.
and I would not tell you how to buy or construct as I have no idea of your goals but an accountant will as thats his/her job

 

[Philip Thomas]

Get the structure right – consult your accountant.

I agree with grossreal.

This is not an area you can afford to be general.

This is defiantly an item for “your” chartered accountant as it depends very much on your current personal situation & where you will be in the future. Current income, exposure, liabilities, risk profile, borrowing ability, lender requirements & different tax liabilities. As there are a lot of tax implications on various structures so can you afford to not get it right???

Philip

 

[grossreal]

hi
not only that if you get it wrong it is very expo to try to rearrange.
I always worry when people try to save on the small things in developments and the people involved
why because they are the once that fall apart when needed and they don't have the right people in the right seats
four things you need on a development
a good accountant
a good legal
a good builder
and a happy funder
then if all goes to poo
you have a team to assist to solve the problem
thing don't go right some times with developments and without a good team your gone

 

[belleran]

I have built a couple of duplexes before in the name of the family trust but it has been definitely a learn as I go experience.

This time I am planning to rent the dual dwelling for five years plus. My understanding is that I will not have to pay GST on the sale after this time???

I have contacted the vendor's solicitor to ask for the margin scheme to be applied to this sale but I am not expecting a positive response. Without the margin scheme being applied apparently my profit when the properties are eventually sold will be about $10k less. My error was letting the estate agent rush me through the signing of the contract. I usually take them home and read carefully before signing. I don't know why I didn't on this particular day. I can still withdraw from the purchase if better to do so due to the sale being conditional upon finance approval and satisfactory soil test.

 

[belleran]

Update is that the vendor now wants to apply the margin scheme to his sale.