NSW stamp duty for JV development

[Rockstar]

Just heard Ken Raiss talking on Kevin Turner's Real Estate Talk show. He gave some general information on partitioning in relation to avoiding stamp duty for JV's in NSW.

Would any of you be able to shed some light on the following scenario?

Two parties wish to carry out a simple strata title duplex development in NSW as a JV. A block of land needs to be purchased and two units constructed. Then the title needs to be split and put into each of the partners name. How would you go about avoiding the double stamp duty when splitting the titles at the conclusion of the project?

Stamp duty is payable on vacant land though there is currently a $5000 rebate if you lay foundations within 6 months of settlement.
Stamp duty is also normally payable on transfer of title once the project is completed and split between the two parties.

Can some stamp duty be avoided by a deed of partition. How much could be saved in this situation?

Thanks,

 

[coastymike]

Ken is spot on. It can be done and the legal contracts underlying things and the timing of documentation is critical. Seek out someone who has done it before from an accounting perspective and a legal perspective as there are a few tricks for beginners.

 

[Terry_w]

It is done by setting up a deed of partition at the time of purchase. Each party will be joint purchasers and the % split on the initial ownership must match the final division of the land. If done property then the land can be split into 2 titles with one going into each name. There would be nominal stamp duty. s 30 Duties Act.

You also have to consider the GST and CGT side of things.

 

[Rockstar]

Thanks for the info guys.

Does a lawyer or an accountant set up deed of partition?

If the land is purchased 50:50 then the 2 houses can be cleanly split into each name. Is this the case if the unit entitlements of the strata are 60:40 or do they have to be 50:50. eg: one house may be larger and more valuable than the other.


Is stamp duty only payable for the purchase of the land at the standard rate?

I imagine the GST would only occur for the JV partner who sold their unit upon completion?
And CGT would only occur if their unit became an IP?
Either partner could move in as PPR without any tax burden?

 

[Terry_w]

Only lawyers can prepare legal documents.

Don't assume that if land is purchased 50/50 that it can be a clean split. What if the land size ends up being 57% to one and 43% to the other.

GST could be applicable on the transfer from 2 owners to 1 owner. Advice is needed on this too.

You also need advice on the CGT side of things. May be on revenue account too, not capital account.

Stamp duty would be on the dutiable value as per normal.

 

[PaulGTaxAdviser]

Partition NSW

Partitioning is now a taxable supply for GST purposes. watch it cause what someone didnt tell you is that this creates a GST funding issue (Banks wont fund it). Someone has to pay the 10% now and hold it until dev is completed.

 

[RPI]

Qld Duties Act deals with it too. Not an issue stamp duty.

CGT if structured well not so much hassle

GST harder



I think it works when you have JV partners who can pay cash (or use other property for security). Issue is finance.

On a smaller one then fair enough.

Imagine that you have 10 parties though, all of whom will be left with a unit.

How are you going to structure that through a lender?

I would not advise a client to be jointly and severally liable for 9 other peoples debt.

Even if all through trusts, director guarantees by 10?

Sounds messy.

I have a couple of clients we are doing it for now unfinanced (or at least unsecured).

Am seeking advice from some of our learned friends on here regarding financing.

D