Home' API Magazine : January 2014 Contents 71
API JANUARY 2014
JANUARY 2014 API
This information is of a general nature only and does
not constitute professional advice. You must seek
professional advice in relation to your particular
circumstances before acting. This information is also to
be read subject to the disclaimer on page 6.
respect that theirs may be different
I’d also like to point out that you’re
actually going about this the wrong way.
You should never have a price in mind
and then go out looking for a property
in that range. How do you know that
$400,000 is the right price for a property
situated in a hotspot?
It could be that the greatest hotspot at
this moment in time has a median price
of $300,000, or perhaps it’s $500,000, or
maybe even $250,000!
The price of a property has no
relationship to how well it might perform
as an investment – the only thing that
matters is whether an area has the
required growth drivers or not.
Before you even consider how much
you’ll borrow, who from and what type
of loan you’ll get, you have some work
to do. You must become educated and
learn how to be a good investor so that
you can protect yourself and ensure that
what you eventually buy has every chance
Just as a doctor must go to college
before picking up a scalpel and
performing his first operation, you have
the same responsibility to learn how to
invest well. If you don’t, then you simply
can’t know if what you’re buying has the
characteristics needed to be a good long-
Once you’re educated, everything else
¿ WHICH STUCTURE IS BEST?
QI’m looking to demolish my existing
primary residence and develop a
number of units, currently in an individual
ownership structure, with a partner. We’re
looking at setting up a company structure
to do the development. What are the legal
and tax implications that I’d need to be
AThe first thing I’d recommend is
getting a valuation of the property so
that you can crystalise the exempt capital
gain during the time it has been your
principal place of residence.
If I assume the partner is not already on
the title of the property, then you have two
options: either set up a joint venture or
transfer part of the property to them.
Option one sees the need for a joint
venture (JV) agreement and some legal
advice, and you could utilise a company
as the JV construction manager to give
added asset protection of the developer
not being the landowner.
Using a joint venture, you can structure
the final outcome a number of ways – one
being that at the end of the development
you each own certain units rather than
collectively owning the whole lot. This
then means that each of you can choose
to do whatever you want with your own
units and be taxed accordingly.
If you decide to transfer part of the
existing property to your partner then
they’ll be up for stamp duty on the
current market value. You can potentially
then set up your company to manage
the development on your behalf, and
again have added asset protection. At
the end of the development you’d own
the whole development together (i.e.
if you transferred 50 per cent of the
original property to your partner, then
you now each own 50 per cent of the
I wouldn’t suggest transferring the
property into a company, as you have to
pay stamp duty and you’d then lose any
capital gains tax concession that you have
on your share. That said, there are limited
circumstances where this may be viable
so it’s best you talk with your accountant.
If you have a question for our panel,
please send it in 100 words or less to
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BRICKS & MORTAR // Q&A
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