I'm thinking of buying a block of land with a friend, and yes - before I get a lecture from anyone I've read all the warnings about friendships turning bad when things go wrong, and the importance of having every possible outcome documented and agreed on from the start so for now that won't be an issue.
The purpose of this thread is to get some opinions on the structure, taxation and finance side of things.
The plan is to buy a vacant block of land with a long-term settlement, obtain development approval for a 2 lot (dual-occ) subdivision, split the block in half, build two houses and come out with a house each at the end of it all.
We're trying to decide which is the best structure to use for buying the land. Starting with the end in mind, the aim is to purchase the land together but as soon as construction starts and the footings are laid we will create two separate titles and hold one title each - in our own individual hybrid trusts. We both intend to hold the properties long-term with no plans of selling.
On the finance side of things, each partner will finance half of the purchase cost of the land (plus the DA fees etc) from our own funds; i.e.- existing LOC's against other properties. This way we don't need to approach a lender until we have separate titles and can arrange our own individual finance for the construction using our own trust structure/s.
In regards to taxation I recently read an interesting article written by Julia about PBR 30342 where she pointed out the possible CGT consequences of building a duplex with a friend. The catch is the ATO sees the transaction as each partner transferring their share of the other’s house on completion, so they are each up for CGT on the gain on half the other’s house. In the example the two houses were built first and then the titles were subdivided so I don't know if this is relevent in my situation?
I'm sure I'll have a lot more questions but for now any suggestions or advice would be very helpful.
Thanks, Ebbie.
The purpose of this thread is to get some opinions on the structure, taxation and finance side of things.
The plan is to buy a vacant block of land with a long-term settlement, obtain development approval for a 2 lot (dual-occ) subdivision, split the block in half, build two houses and come out with a house each at the end of it all.
We're trying to decide which is the best structure to use for buying the land. Starting with the end in mind, the aim is to purchase the land together but as soon as construction starts and the footings are laid we will create two separate titles and hold one title each - in our own individual hybrid trusts. We both intend to hold the properties long-term with no plans of selling.
On the finance side of things, each partner will finance half of the purchase cost of the land (plus the DA fees etc) from our own funds; i.e.- existing LOC's against other properties. This way we don't need to approach a lender until we have separate titles and can arrange our own individual finance for the construction using our own trust structure/s.
In regards to taxation I recently read an interesting article written by Julia about PBR 30342 where she pointed out the possible CGT consequences of building a duplex with a friend. The catch is the ATO sees the transaction as each partner transferring their share of the other’s house on completion, so they are each up for CGT on the gain on half the other’s house. In the example the two houses were built first and then the titles were subdivided so I don't know if this is relevent in my situation?
I'm sure I'll have a lot more questions but for now any suggestions or advice would be very helpful.
Thanks, Ebbie.