Subdividing property has the potential to increase the value of the land and ultimately increase your return on investment. Whilst the allure of potential profit can cause you to ‘rush in’, it is vital that you understand the requirements, processes and associated costs prior to embarking on the subdivision bandwagon! 

What is ‘Subdividing’?

The process of subdivision involves splitting your existing property/land (or ‘lot’ as it is known technically) into two or more new lots. Subdividing can also be undertaken by adjusting the boundaries between two or more lots, to make some lots smaller or larger. Most subdividing activities require a development approval from your local Council.

What is Involved in the Subdividing Process?

The first step in investigating a potential subdivision process is to obtain advice from a professional town planner. A town planner will be able to inform you of any potential restrictions or limitations with your proposed project. It is important to know about these matters early on in the process, so that you can determine if your project will be commercially viable prior to investing a lot of time and money into it!. . Your town planner can then assist you with any application to your local Council to gain approval. It is important to note that there will be applicable fees for this application and any approval will be subject to certain conditions being met. These conditions must be complied with and again payment of any fees associated with this will need to be made. 

You will also need to engage a certified surveyor to prepare a Survey Plan (eg. a technical plan showing the measurements and other features of the new lots) in the appropriate format. There may also be other plans that will be required to be prepared as part of the conditions imposed by Council. 

Once Council has ‘endorsed’ (a fancy word for signing off) all the documents, they can now be lodged with the Titles Office and once the documents have registered, the lot is created – magic! The new lot(s) that has been created can now be sold to a potential buyer. 

Can I Sell the New Lot to a Buyer Prior to Completing my Subdivision?

Yes – marketing and selling a lot or lots prior to them ‘existing’ is called ‘selling off the plan’. There are specific disclosures that must be given and certain special conditions that must be included in any ‘off the plan’ contract, so it is important that you engage real estate agents and lawyers (like Enterprise Legal) who are experienced with these specific types of contracts. 

Ultimately, it is important to weigh up whether or not you are better off  waiting for the proposed lot to be approved and created, to ensure the contract can go ahead and will not need to be terminated if the project does not ultimately proceed. Of course, this needs to be balanced with the potential benefit of ‘locking in’ a potential buyer in a hot market.  

What Does Subdividing Cost?

A large deciding factor in whether to go ahead with a subdivision project is of course the costs involved! Accordingly, when preparing a project budget, you should factor in the following costs at a minimum: 

1. Surveyor Fees; 

2. Town Planner Fees;

3. Council Fees;

4. Legal Fees;

5. Titles Registration Costs;

6. Holding Costs, such as land tax and Council rates;

7. Agent's Commission; and

8. Marketing Costs.

It is also imperative that you speak with your accountant to discuss any potential tax or other financial considerations in relation to the proposed project.

Need Assistance With Subdividing Your Property?

If you are interested in subdividing your property, contact the specialist Property and Business lawyers at Enterprise Legal to discuss how we can assist you further.

We can assist with all aspects, from providing you with initial advice on the project, through to managing the ultimate sale of the lots.

We work closely with your other professional advisors (and can even recommend trusted town planners etc.) to ensure that the project progresses as smoothly as possible.

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UPDATE: On the 30 September 2022 the Queensland Government shelved the proposed changes to Queensland and Interstate land tax obligation.

These changes that were set to come into effect next year, and will now be deferred in parliament, the previous Queensland Land Tax requirements will remain in place.

What is Land Tax?

Land Tax is a State tax that is calculated based on the value of ‘freehold land’ (including vacant land and land that is built on) that you own in Queensland, calculated at midnight on 30 June each year. The rate you pay is based on several factors including:

1. the type of owner that you are (eg. an individual, a company, a Trust etc.);
2. whether you own the land jointly with other people;
3. the value of the land; and
4. if you are eligible for any exemptions (eg. if the land includes your principle place of residence).

Put simply, if the total value of your land is:

• $350,000 or more – for absentees, companies, trustees of trusts and superannuation funds; or
• $600,000 or more – for individuals and trustees of special disability trusts;

then you will be paying land tax (unless you have an exemption)!

What’s Changing?

Currently, Land Tax is exclusively calculated on the value of the land that you own in Queensland, however from 30 June 2023, Land Tax will be calculated on the value of all land owned by you throughout Australia. The threshold amounts for land tax will remain the same, causing many individuals and companies to pay Land Tax, where previously they did not have to.

Of course, if you only own land in Queensland these changes will not affect you and you will still be able to claim any exemptions applicable to you.

Consequences if You Own Land Outside of Queensland

Your interstate land will be valued according to the valuation legislation in the State or Territory in which it is located. This is referred to as the ‘statutory value’ and this value will be totalled with your Queensland land values and it may push you over the limit causing you to incur Land Tax where previously you were exempt.

If this is you – you will need to set up a QRO (Queensland Revenue Office) Online account and complete the declaration for all of your Australian held land.

Summary

Of course, there are plenty of exemptions available in relation to the Land Tax, so check if you are eligible before parting with your money!

If you need assistance with determining your eligibility or if you want to appeal a Land Tax assessment from the Queensland Revenue Office, contact our experienced Property Law team today:

☎️ | (07) 4646 2621

In January this year we posted an article titled ‘Business Structures 101’. This is the follow-on to that article, and is aimed at existing business owners who are thinking about starting a second (and separate) business (Second Business). Although we will cover some different content here to Business Structures 101, we recommend reading these articles in sequential order), so if you haven’t already checked it out we encourage you to have a quick read: Business Structures 101 and then come right back for the follow-on.

The quickest and easiest option when setting up a Second Business is to use the entity you already have, and simply register a new business name and start operating the Second Business. In some circumstances that can work, but making this decision still requires taking some time to consider whether it is really the best option in your specific circumstances.

The following are some key issues you should consider:

Crossover

You should consider how your current business (First Business) will be impacted if anything goes wrong with the Second Business.

This is quite a big risk to consider, because you want to ensure that appropriate steps are taken to protect the First Business if something happens with the Second Business (and vice versa). For example, if a disenfranchised former employee of the Second Business decides to bring a claim, then the claim is brought against the controlling entity. If the Second Business was trading under a separate entity, then only the assets and money held by that entity would be at risk, and (all going to plan) the First Business could continue to operate totally unaffected by that claim.

In short, you might lose the Second Business, but you would still have the First Business to fall back on. Alternatively, if both business are operating under the same entity, then both businesses are impacted and you may be required to sell the First Business (or at least some assets in it) to meet the claim. 

Saleability

One business is a lot of hard work, let alone two. It’s highly likely that at some point you may want to sell one of the two businesses, or bring someone in at an ownership level to help run it. If both businesses are operating under the same entity, it is very difficult to ‘uncouple’ them for a sale. It can be done, but will cost significantly more than it would to set up a new entity at the outset. Whereas if the businesses are operating under separate entities, then it is a much easier task to sell the relevant business or bring someone in by way of a share sale.

Tax Planning

You should also seek accounting/tax advice, again based on your specific circumstances. There may be some added tax benefits that you can obtain by separating the Businesses into different entities.

Ultimately, it’s important to consider your own risk profile and how opening a Second Business will affect your First Business, and more importantly you as an individual.Knowing your business entity and structure is one of the most crucial parts of setting up your business and is very important to consider when adding to your business portfolio.

Enterprise Legal offers a free Business Health Check, in which we arrange a time to meet with you in-person or by phone/Zoom to assess your business needs.

We will work closely with you, your accountant and other financial advisors to give you all the relevant information and discuss the best way to move forward. We can even create your new entity, amend your existing structure, or draft supporting entity documents to support your structure (such as company constitutions, association rules, shareholder’s agreements etc).

Contact the Business Law Team today or book in for your Free Business Health Check:

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