Ownership and Tax Advice Please

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From: Projects .


I would like to do a two unit development with my partner and subdivide and sell one unit and keep the other as principle place of residence. We have one 'high income' and one 'no income'. How should we structure original purchase/ownership of the property and subsequent ownership of the property to be sold so that we minmise the tax paid on sale?

Projects

There is more than one way to climb a mountain.
 
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Reply: 1
From: Dale Gatherum-Goss


Hi

You asked quite a few questions and I'll try to deal with them for you as best I can without any extra information.

To start with, you need to be very careful with establishing this project and, as always, you should consider legal advice as well as advice from your accountant.

In some ways, the tax deduction situation will be in direct competition to the capital gain situation when you sell a unit.

Therefore, and without knowing your "family" situation, it might be best to have the property in the name of the low income earner so that the CGT is at a minimum.

Be aware, there are other issues involved if you already have a house on that land.

I hope that this helps

Dale
(whose warning signals are on alert!!!)
 
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Reply: 1.1
From: Projects .


Dale,
Thanks for your response. The land is vacant. As the outcome my spouse and I are aiming for is to sell our current p.p.o.r. CGT free and build a new p.p.o.r. for ourselves and a second house on separate title after subdivision for sale. To get a capitalised interest construction loan the lender requires the second house to be sold/pre-sold to meet their servicibility requirements, otherwise we would have liked to try to keep this as well as an investment property. We have no personal problems with who holds title. Is there any benefit to be gained with using a Company(GST registered or not) or a Trust?

Many thanks,
Projects

There is more than one way to climb a mountain.
 
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Reply: 1.1.1
From: Dale Gatherum-Goss


Hi!

No, there is not a lot of point using a company or trust for this exercise because you will keep one of the units as your PPOR.

The tax office will likely treat the profit as income and not capital gain and so I would consider having the title of the houses under the low/no income earners name to minimise the tax damage. If so, watch Centrelink and the family payments (if they apply)

Good luck

Dale
 
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Reply: 1.1.1.1
From: Projects .


Many thanks Dale. If it is to be treated as income, how does one treat capital costs such as stamp duty and how and when does one claim interest expenses over the period of planning and construction as it will carry over two financial years?

Projects

There is more than one way to climb a mountain.
 
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Reply: 1.1.1.1.1
From: Dale Gatherum-Goss


Hi

Both costs form part of the expenses involved producing the income in this case and therefore both will be tax deductible.

Dale
 
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