Choosing the Right Entity for Property Development
Selecting the appropriate entity for property development depends on various factors:
1. Revenue Account Development: If the development is likely to be on revenue account due to business or profit-making scheme reasons, the inability of a company to access the CGT discount becomes insignificant. Companies offer advantages like profit retention, asset protection, and fixed interest in the structure, which is beneficial for shareholders, especially in negatively geared scenarios.
2. Partnership vs. Joint Venture: While partnerships are easier to establish and run, and losses can be accessed more conveniently, partners in a general law partnership are jointly and severally liable for partnership debts. Thus, a joint venture might be preferable, ensuring each participant maximizes benefits without partnership liabilities (refer to Yacoub v FCT [2012] FCA 678).
3. SMSF Consideration: Using a Self-Managed Superannuation Fund (SMSF) for property development offers tax benefits due to lower tax rates, typically 15% or even 0% for assets supporting retirement phase interests. However, strict regulatory compliance is a challenge for all SMSFs.
4. Tailoring Structure to Needs: Each entity option has its advantages and considerations. Careful evaluation of tax implications, liability concerns, and regulatory requirements is essential for choosing the most suitable structure for property development.
5. Seeking Professional Advice: Given the complexity and implications involved, consulting with tax experts like Tax Ideas Accountants & Advisers is crucial for making informed decisions tailored to specific circumstances.
For personalised guidance on entity selection for property development, contact Tax Ideas Accountants & Advisers at +61 2 8318 1545 or book an appointment through our live calendar.