Selling off the plan to a related party

Hi guys,

We are currently doing a 3 unit development.

We set up a company for the sole purpose of the venture (family/discretionary trust as shareholder) with my wife and I directors.

Purchased a house, intended to build 4 and sell all...however Council intervention meant we got approval for 3.

We have sold 2 off the plan and building/construction is due to start in June 2015.

Now we wish to keep Unit 1 for ourselves to live in.

I thought we could just sell it from the company to my wife, ie sign a contract off the plan, to sell from the company to my wifes personal name the same as we did for the other 2 we sold off the plan to non related parties. Obtain a real estate agent appraisal letter for the value and use this value.

I thought that by doing this we get Unit 1 out of the company and it becomes our PPOR so exempt from tax when we sell 5-10 years down the track, and we also get the stamp duty savings that come with buying off the plan, basically we pay stamp duty on current land value rather than the full completed value at the end, a significant difference.

However, the advice I have received so far is that because it is a related party transfer (my wife is a director of the company and Unit 1 would be sold into her individual name) she can't get the stamp duty benefits that a normal off the plan buyer receives, ie they will calculate the stamp duty at the time of transfer by which time construction will have finished and the value would be considerabley higher.

Subdivision is to be completed after construction.

As you can see my thoughts are different to the advice received so far, can anyone offer any further clarification or experience on how it is treated (mainly the stamp duty treatment)?

Many thanks in advance.
 
first question is why? wouldn't it be better to just sell to a legitimate third party and go buy someone else's development? there can be no arguments for that. And I see no tax benefit in 'buying' your own property
 
Not really a tangent I want to go on Ausprop, but...

We are currently renting and need to find a PPOR in the near future anyway.

Benefits of keeping Unit 1 of our own developement rather than buying something else:
1. Personal input to design floor plan to our liking.
2. Personal contact with builder to fit out to our liking.
3. No agent commission to sell.
4. We prefer this location and aspect compared to others on the market.
5. We would need to find another property we like which would involve a lot of looking, inspecting and competing against other buyers in a hot Melbourne market.

As you can see it is not about the tax benefit of 'buying' your own property as there is none, it is more about convenience.

I just don't see why we shouldn't receive the same stamp duty concessions compared to non related off the plan purchasers.
 
Stamp duty is levied at the rateable value of the transaction at the time. So if you sell to your wife, before construction then she will be liable for stamp duty just like everyone else.

What I would be more worried about is the Tax requirement that sales to associates will be assumed to have happened at "market value". This means you really can't reduce the end sale much. There could be gst and tax consequences that are worse than stamp duty.

Haas Kaplan
 
Stamp duty is levied at the rateable value of the transaction at the time. So if you sell to your wife, before construction then she will be liable for stamp duty just like everyone else.

What I would be more worried about is the Tax requirement that sales to associates will be assumed to have happened at "market value". This means you really can't reduce the end sale much. There could be gst and tax consequences that are worse than stamp duty.

Haas Kaplan

Thanks Haas....so you don't think there is any issue with us both signing an off the plan contract of sale as directors of the vendor company and she signing as Purchaser?

You can enter a contract with yourself? Well I guess technically a company is a separate legal entity so why not aye.

So as long as the off the plan contract is signed before construction starts, she should receive the same stamp duty concessions any other off the plan buyer would receive.

We have a real etate agent appraisal letter which includes comparable sales to support the market value.

The GST and tax consequences have already been allowed for and will be payable by the company as if sold to any other party, as per the other two units sold off the plan.

Thanks for taking the time to contribute.
 
You can enter a contract with yourself? Well I guess technically a company is a separate legal entity so why not aye.

No you cannot contract with yourself, but a company is a separate legal person so the wife and the company can enter a contract.

Get legal advice on the asset protection aspects.
 
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