Structuring Land Ownership
When you already own land, your options for restructuring may be limited. For instance, if the land is owned by individuals or a business entity, changing ownership structures might not be worth the cost.
However, even if the land's ownership structure can't be changed, the development can still be carried out by a different entity. This helps protect the landowner's assets, like their main residence.
Transferring Land to a New Entity
Consider transferring land to a new entity for property development purposes. For instance, transferring personally owned land to a trust can help distribute profits to beneficiaries with lower tax rates, like adult children. But beware of potential capital gains tax (CGT) and stamp duty implications. Seek legal and tax advice before proceeding.
To minimize CGT, consider applying CGT discounts, small business concessions, or the main residence exemption if eligible. Keep in mind that transferring land may result in it losing its pre-CGT status unless roll-over relief is available.
Stamp duty concessions or exemptions may apply depending on the location and nature of the transfer. For example, in Victoria, transferring land from a trust to a beneficiary might be duty exempt.
Also, consider other implications beyond CGT and stamp duty. For example, transferring ownership to a trust might change future property sales from capital to revenue account, affecting tax treatment.
If the development is likely to be on revenue account anyway, transferring the asset to a new entity might be beneficial for utilizing its benefits.
Got questions? Reach out to Tax Ideas Accountants & Advisers at +61 2 8318 1545 or schedule an appointment through our live calendar.
