Help with Subdivision of Property - No Idea Where to Start!

djmatt24 on 17/04/2015 - 12:07

My parents have a 2.5 acre property in suburban Brisbane that they've been sitting on for 30 years. After lots of small hints over many years, they are finally opening up to see what their options are with the land. I've been pushing for them or the kids (3 of us) to subdivide and build townhouses on however many we can afford to have a passive income.
For a long time it's been in to "too hard" basket.

After they talked to an accountant a few days ago, they were told that if they subdivided, they'd be considered property developers and Capital Gains Tax would be applied to the value of the land if it was sold/transferred, even to a family member. They should instead sell the entire block. For the record, they did a subdivide about 20 years ago and can't remember paying CGT at the time.

So it's very early days. From looking at the council website, information is pretty complicated to understand, and the process seems daunting. No wonder it's been in the "too hard" basket.
Does anyone have any advice with subdividing? Or CGT? Or even perhaps have some alternative ideas about what to do with the land? Sell?
Thanks!

General Discussion

Comments

  • ozhunter on 17/04/2015 - 12:17

    Or CGT?

    Yea, I think as it is now, you can't gift property to anyone without paying CGT.

    • ozhunter on 17/04/2015 - 14:43

      Actually if they acquired the property before Sept 20, 1985, they wouldn't have to pay CGT.

      All assets you’ve acquired since tax on capital gains came into effect (on 20 September 1985) are subject to CGT unless specifically excluded.

      https://www.ato.gov.au/general/Capital-gains-tax/

  • dasher86 on 17/04/2015 - 12:24

    Go see a good conveyancer.

    • 2jzzzz on 17/04/2015 - 12:27
      +3

      I wouldn't trust a conveyancer, for the dollars you are talking, go to a good solicitor.

  • tomcat83 on 17/04/2015 - 14:30

    My…. very limited… understanding of CGT is that you wont need to pay CGT unless the ownership changes, so if you subdivided and then built townhouses then they were rented out then you wouldn't have CGT until they were sold. Perhaps if your parents sold the property to a trust (No cgt, claiming primary residence) Then the trust subdivided then the trust would still need to pay CGT on eventual sale but i think it would work out less as you effectively "bought" again at current market prices, not 30 year old prices….. I don't know, talk it over with your accountant and solicitor

  • djmatt24 on 17/04/2015 - 15:36

    There's some suggestion that if we built houses on this scale we'd be classified as property developers. Anyone have any experience with this? There's a guide on the ATO about subdivision, but the examples given are for lots mainly splitting into 2. This would be splitting into perhaps 10 lots, and would need a street to be built.

  • gabbasan on 17/04/2015 - 16:12

    Might be worth looking on a couple of the property investment type forurms for similar examples (e.g. somersoft) plenty of examples of sub divisions and tax implications on those.
    With the dollars you would be looking at an accountant with property background will be worth talking to.

  • SmiTTy on 17/04/2015 - 16:51
    +2

    my suggestion would be to contact the town planner at your local council. Make an appointment with them and they're usually quite helpful to take you through the process in terms of what is required. You would normally need a surveyor to submit the application who might also be able to give you some advice regarding the process . (Sorry if this comment is not applicable in QLD).

    Regarding CGT… your accountant should be able to give you some advice around what your options are (that may, in turn, minimise CGT). Make sure you see a good accountant - perhaps one who is a property investor himself.

    This is probably stating the obvious .. i apologise in advanced.

  • Tangenyahu on 17/04/2015 - 20:09
    +1

    Do you know if you can actually subdivide based on your zoning? If not, check the interactive mapping here: http://cityplan2014maps.brisbane.qld.gov.au/CityPlan/ When you know the zoning go to the planning scheme at http://eplan.brisbane.qld.gov.au/ Then go to chapter 9 development codes, section 9.4, find the subdivision code, and go to the end of the code and see what your minimum lot size is based on your zoning. If you need to put a new road in then that will obviously affect your yield.

    Access to services with appropriate grades are a major issue (stormwater and sewer are the most critical) but there's no free service I can direct you to for this.

    Townhouses may or may not be possible based on the zoning. Council have made it a lot harder to get townhouses on Low Density zoned land since the new planning scheme came into effect, but there is still an opportunity to make an application under the superseded planning scheme (up until 30th June this year) if you are affected by the changes.

    At some point you will need to engage a town planner, surveyor, and potentially engineers (and architect if townhouses) if you're going to redevelop the site.

  • minniethemoocher on 18/04/2015 - 12:36

    Make sure you talk to an accountant that specializes in that area. Not all accountants do.

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