On-selling before settlement

From: Manny B


Howdy there,

I'm looking at a property that has a 12 month settlement on it which I was hoping to purchase & get town-planning approval on it (having it as a condition of sale for me to do that) & then on-selling it with a profit hopefully prior to the 12 month settlement...

My question is (for anyone that has done this):
a. would I still have to pay stamp duty if the new buyer can settle the property at the 12 month period?
b. would the profit be classified as CGT?

My thought is that if I had to pay stamp duty, that I might as well hang on to it & just find a developer to build the townhouses on it with an agreement that he keeps 3 & I keep the other 3 (townhouses in the area are around $450k each)... which would be more profit for me, but the risks would be far higher (ie. builder going broke, etc.)...

Thanx in advance,

Manny.
 
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Reply: 1
From: Dale Gatherum-Goss


Hi

Yes, you would look at CGT on the profit and without the general 50% exemption because you will not have held the property for more than 12 months.

Of course, if you make a habit of this then you can argue that it is a business profit and not CGT. This allows you to be creative with your tax deductions if you operate through a trust or company. Just something to consider . . .

The stamp duty is one that I am not entirely sure of this morning. (Must not have had enough coffee yet!) Logic tells me though, if you do not take ownership of the property and sell before it is completed, then you will not pay s/d on the purchase of the property. Please check this one with your solicitor though.

Good luck

Dale
 
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Reply: 2
From: David Nolan


Hi Manny, a possible answer for you may be to purchase the property using PUT and CALL options. This may well save you having to pay stamp duty if you on-sell within your options period. Check with your solicitor.
With regard to developing and or a Joint Venture with a builder/land owner, you need to undertake a detailed feasibility to determine the overall potential profitability.
If you would like to discuss this further please feel free to email me directly, I would be happy to point you in the right direction.
Good Luck and Happy Investing.
David Nolan
Australian Property Concepts
 
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