For our second blog, Milan and I debated a number of topics and both agreed that a decision to downsize or free up equity in your current home is worth thinking about at any stage in life. If freeing up equity can help you achieve your lifestyle goals, then this article might be worth a read.

Recently there were a number of changes in Western Australia to the residential planning laws which now means that you might be living in a suburb where you could possibly subdivide your block of land.

We were recently talking to a friend at our golf club who has a family home on a large quarter acre block in Bedford. The planning law changes now mean that he and his wife have can further sub-divide their property. Many Bedford lots could be subdivided into two, but with the changing zoning, our friend’s lot can now be sub-divided into three blocks.

So what does this mean for your finances? There could be a number of ways to look at realising further equity from this subdivision, so we will walk through some possible options:

A) SELL THE LOT – Sell the lot in its current form including your home with the sales message that there is further development potential. For many the benefit of this option is that this is a simpler method of moving forward and cashing in on the value of the property without having to get involved in the red tape of subdivisions and complications of building, and eventually marketing the new developed houses for sale. This approach may have less tax implications for you if you own this as your place of residence as there is no capital gain tax implication on such an owner-occupier residence.

B) REMAIN IN THE FAMILY HOME AND SUBDIVIDE – Sub-divide the lots for sale and remain living in your family home. This is a good benefit if you love your home and where you live and don’t really need the land around you. You may need the expertise of a town planner or a building company if you choose this option. Getting the legal information together for subdivision and sale does require a number of hurdles to be achieved. You may also need to seek some tax advice and/or financial planning advice for this option as once the lots are subdivided, they may not be considered to be an owner-occupied residential property and become an investment property. Retaining this land in this format may also result in land taxes.

C) BUILD A NEW HOME AND SUBDIVIDE – Sub-divide the lots for sale and build a new home for yourself on one of the lots. This is a great benefit if you love your location and want to build a new home to suit your current lifestyle. You may also choose this option as a downsize in pre or post retirement. Building ergonomically for older age is also a big consideration for many these days. This is a future proofing option worthy of consideration. You may then be in a maintenance free residence for your retirement years. Again consider the tax implications of this choice, as well as the legal hurdles for sub-division. Engaging a builder at present is also time consuming, so think about whether you can remain living in your current home (finances permitting) or whether you would prefer to sell your home prior to building.

Of course many of us dream of being a property developer or property mogul, there is a need to carefully plan out the benefits of this project. Consider taking a course to be an owner builder, even if you are engaging a builder so that you can better understand the obligations of building and sub-dividing. You should also give consideration to the length of time the project may take. Sub-division processes with State and Local government can be lengthy as can the engagement and building practices due to supply chain issues being encountered world wide.

Depending on your age, with some of the recent changes to the superannuation laws, you may also be able to transfer a lump sum to your superannuation with reduced tax implications. This may be an option for people looking to boost their retirement earnings.

Any person seeking to undertake an investment strategy or a change in their retirement planning should always consider seeking professional legal or financial advice and seeking the expertise of a qualified tax accountant.

Good luck with the investing strategy if this is you.

moneymanagement #wealth #goodmoneyconversation #savings

Milan Chetkovich is a licenced finance broker, operating mortgage services business – Essential Financial Services – Finance Broker Licence – 392928. Milan is a Certified Practicing Accountant, and holds an Accounting degree and Economics degree from the University of Western Australia.

Tracey King is an experienced brand, product and marketing senior executive with industry experience in financial services, banking, aged care and retail industries. Tracey holds a Bachelor of Business in Marketing from Edith Cowan University, Perth Western Australia.

The information in this Blog is general and has not taken into account your objectives, financial situation, or needs. It is not personal advice. You need to consider whether this advice is right for you, having regard to your own objectives, financial situation and needs. You may need it is important to check any product information directly from the product provider. Ensure you consider the relevant Product Disclosure Statement (PDS) or other applicable product documentation before making a decision to purchase, acquire, invest in or apply for a financial or credit product. Buying and selling real estate may have tax implications.  Ensure you seek professional legal or tax advice before making a decision.  You may wish to seek financial advice from a suitably qualified adviser or finance broker. The writers of this Blog may receive a fee for referring you to a credit or banking provider.