Tax implications - Stuck in a Pickle

[kitkit929]

Hi,

I'm abit stuck and am hoping to find any help possible/ or even someone to direct me to the right direction.

Scenario

Current IP in Boronia (knox council - Vic, 3155), land size over 900m2 , have a wooden house on it, mostly have to demolish (confirmed) and is owned by me and my mother

Parents are interested to subdividing into 3 units, and distribute it among the siblings (3 of us, young working adults)

Questions:
What is a more tax effective way for our parents to pass on the property, subdivided?
Main reason for project is because my parents want to help kick start our property portfolio
is this project worth the effort?

Is this the best way: Subdivide with approved plans > Demolish existing house > then sell to kids

Another Issue: My name is already in the title, will I have to pay tax twice during the subdivision?

Hope someone can shine some light in my situation as to how to proceed.

Thank you in advance.

 

[Terry_w]

Hi,

I'm abit stuck and am hoping to find any help possible/ or even someone to direct me to the right direction.

Currently I (child) own a property in joined name with mother.

Mama and Papa wish to subdivide the property and split among the three kids. (So kids can start their own property portfolio.)

How to proceed to reduce fees/tax etc?

Is this the best way: Subdivide with approved plans > Demolish existing house > then sell to kids

Another Issue: My name is already in the title, will I have to pay tax twice during the subdivision?

Hope someone can shine some light in my situation as to how to proceed.

Thank you in advance.

Too any issues to poke a stick at. Are you trustee for your dad?

 

[Paul@PFI]

Many states dont recognise children owning property and impose land tax as a child cant adopt a residence by choice. A child cant contract to buy land. However children can inherit land with good tax benefits.

The tax regime that applies to kids is VERY punitive and no tax benefit exist in many instances. Tread carefully. Even if its in kids name it may well be parents income for tax purposes.

I recommend the family seek personal tax advice from a property tax specialist.

 

[kitkit929]

Hi Terry,

Unfortunately, I'm not the trustee for my dad. I know it's abit of a sticky situation and am hoping to find the best solution for it.

P.S. - Sorry didnt' mean to double post am new to this forum. Trying to figure a way to remove from other thread as this query seems a better fit here in tax.

 

[kitkit929]

Many states dont recognise children owning property and impose land tax as a child cant adopt a residence by choice. A child cant contract to buy land. However children can inherit land with good tax benefits.

The tax regime that applies to kids is VERY punitive and no tax benefit exist in many instances. Tread carefully. Even if its in kids name it may well be parents income for tax purposes.

I recommend the family seek personal tax advice from a property tax specialist.

Thanks Paul for the directions. Will look for property tax specialist. Do you have any recommendations?

 

[Terry_w]

Many states dont recognise children owning property and impose land tax as a child cant adopt a residence by choice. A child cant contract to buy land. However children can inherit land with good tax benefits.

The tax regime that applies to kids is VERY punitive and no tax benefit exist in many instances. Tread carefully. Even if its in kids name it may well be parents income for tax purposes.

I recommend the family seek personal tax advice from a property tax specialist.

Paul, not sure that the Op mean minor child.

 

[Terry_w]

Thanks Paul for the directions. Will look for property tax specialist. Do you have any recommendations?

Paul doesn't know any tax people at all, he spends his days reading articles on hairdressing.

 

[kitkit929]

Paul, not sure that the Op mean minor child.

Hi Terry, I have added more details into the post. Hope it helps to clarify the situation.

 

[Terry_w]

Change of title will mean stamp duty and possibly CGT.

Stamp duty may be minimised by transferring it when it is valued the least. This may be after demolition.

Transfer is a CGT event and CGT will be at market value so this may also work out cheaper to do while land only. but there are other implications.

You have to also factor in finance if needed, and many other factors.

 

[kitkit929]

Change of title will mean stamp duty and possibly CGT.

Stamp duty may be minimised by transferring it when it is valued the least. This may be after demolition.

Transfer is a CGT event and CGT will be at market value so this may also work out cheaper to do while land only. but there are other implications.

You have to also factor in finance if needed, and many other factors.

Thanks Terry.

My current accountant told me he doesn't know, speak to financial planner. Financial Planner told me to speak to accountant.

I'm abit confused as to how to start tackling this matter.

My parents have already started the planning process - so I'm hoping to find a specialist or at least have a starting point.

So am hoping I can find some contacts and nut down all the factors and parties involved.

 

[albanga]

Paul doesn't know any tax people at all, he spends his days reading articles on hairdressing.

Haha. Kitkit do yourself a favour and contact Paul, based in Sydney but will be able to help you out no worries.

 

[Paul@PFI]

Hi Terry, I have added more details into the post. Hope it helps to clarify the situation.

Maybe a coal minor ? Hi Ho...Hi Ho....

 

[Paul@PFI]

Hi,

I'm abit stuck and am hoping to find any help possible/ or even someone to direct me to the right direction.

Scenario

Current IP in Boronia (knox council - Vic, 3155), land size over 900m2 , have a wooden house on it, mostly have to demolish (confirmed) and is owned by me and my mother

Parents are interested to subdividing into 3 units, and distribute it among the siblings (3 of us, young working adults)

Questions:
What is a more tax effective way for our parents to pass on the property, subdivided?
Main reason for project is because my parents want to help kick start our property portfolio
is this project worth the effort?

Is this the best way: Subdivide with approved plans > Demolish existing house > then sell to kids

Another Issue: My name is already in the title, will I have to pay tax twice during the subdivision?

Hope someone can shine some light in my situation as to how to proceed.

Thank you in advance.

I'm confused. Maybe its the focus on hairdressing that led to that. I should have done a Masters in Tax in hindsight. ......Lets see A property owned by yourself and your mother and someone else (one of whom (Father) is not an owner) wants to build on your land and then give you what you already partly own as well as to two other siblings .

Changes to title will trigger duty, CGT and other issues but given the part ownership it may not be that bad. A DA in itself isn't a issue. Strategies hinted at by Terry are correct - reduction of taxes is the aim. Some strategies are needed. I would have more concern about the intent - Its possible that it wont be subject to GST but I cant rule that out based on facts so far. Then there is the intention - Is it to make $$ or to help family.

I'm always wary of parents who want to give away assets to kids and I don't like to be involved in deprivation of wealth strategies which could harm them later and me too. A better understanding of why your name is on title and why you keep referring to both parents would be a good start. Also a understanding of how this will be funded too. My direct email below.

Parents situation needs some consideration as there could be gifting here and deeming rules if Centrelink pensions are claimed in the next five years. I can see why someone mentioned a FP. That's Ok we have the FP and the tax etc

I don't assist with financial projections to arrive at making project choices. But I can advise on the tax issues etc so you can better project the outcome

 

[Terry_w]

Thanks Terry.

My current accountant told me he doesn't know, speak to financial planner. Financial Planner told me to speak to accountant.

I'm abit confused as to how to start tackling this matter.

My parents have already started the planning process - so I'm hoping to find a specialist or at least have a starting point.

So am hoping I can find some contacts and nut down all the factors and parties involved.

This is not financial advice but taxation advice with a bit of legal advice regarding transfer of title. First point of call would be a tax agent, like Paul.

 

[kitkit929]

Thanks all
FYI Paul, I'm coming... Just hope it's not too late...