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The Reserve Bank’s latest cutting of the official cash rate is focusing the attention of property investors on how much they are paying in interest on their investment loans. Indeed, the latest cut and the varying responses of the lenders should prompt investors to make sure their loans are highly competitive.
First, you should understand exactly how much you are paying on your existing loan in interest rates and fees.
Upon request, your lender must provide you with a fact sheet setting out how much you are paying on your loan in dollar and interest rate terms. The fact sheet covers the total amount payable over the life of the loan (given the current variable rate), amount payable each month and ongoing fees. (See a sample loan fact sheet on ASIC’s consumer website, <a href="https://www.moneysmart.gov.au/" target="_blank">MoneySmart</a>.)
Armed with the fact sheet on your loan, you can then compare competing loans.
Mitchell Watson, a senior analyst with interest rate researcher Canstar, suggests that borrowers prepare a short list of what appear to be the most competitive loans.
Interest-rate researchers such as Canstar and  InfoChoice publish detailed tables of mortgage rates online.
Don’t just compare advertised rates but also the so-called comparison rates which incorporate the impact of up-front and ongoing charges (not all costs must be published), based on a 25-year, $150,000 loan.
Watson says the next step for property investors is to work out exactly how much they would pay in dollar terms each month and over the expected life of their borrowing for each of the competing loans on their short list. He points out that the mortgage calculators of the major banks provide a means for borrowers to compare the dollar cost of different loans from different providers. ASIC’s MoneySmart website also has a “mortgage switching calculator”.
 
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Of course, many investors rely heavily on mortgage brokers to hunt them down the best deals. Nevertheless, smart investors make sure they are as informed as possible about what is happening with interest rates.
If you are contemplating switching loans, carefully calculate the possible costs involved with this. Although the government has barred mortgage exit fees on loans written from July last year, lenders can still charge loan discharge and administration fees. With fixed-rate loans, break fees are payable and can vary significantly depending on how early the loan is being terminated and the size of the loan.
Watson also suggests borrowers check whether an application fee is payable on any new loan being considered. He suspects most lenders would be willing to waive their application fee to win your business.
Perhaps Watson’s most valuable piece of advice is that you should try to negotiate a lower rate with your existing lender. But first do your research of competing rates so you can strongly negotiate. 
“Existing lenders will look to retain your business because it is a lot cheaper for them to keep an existing customer than to attract a new customer,” says Watson.
Watson stresses that few borrowers pay the standard variable rate on their property loans. “The standard variable rate tends to be a benchmark rate which other products are discounted off.”
Craig Morgan, managing director of mortgage provider Independent Mortgage Planners, agrees with Watson that the starting point for getting a better deal is to try to negotiate with your existing lender. “If you don’t ask, you don’t get.”
He says borrowers should inform their existing lenders that they have researched competing rates and are thinking of taking their business elsewhere.
Morgan stresses that borrowers comparing competing loans should work out exactly what they are likely to pay in dollars given the size of their loan and the length of time the loan will be held.
Comparison interest rates can be misleading, he explains. This is mainly because the loan that an individual borrower is seeking may be much bigger and the likely time that the loan is likely to remain in place may be much shorter than the theoretical information used to calculate comparison rates. (As mentioned, comparison rates are based on 25-year, $150,000 loans.)
For more questions to ask as to how your residential property portfolio is performing, <a href="http://propertyobserver.com.au/ebooks/free-ebook-how-is-your-residential-property-portfolio-performing" target="_blank">download our free eBook.</a>
To find out <a href="/news">where residential property should sit within your portfolio, sign up for our free webinar on Thursday, November 29 at 12.30.</a>
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Are my financing arrangements as competitive as possible? Countdown 1 to Property Observer wealth-creation strategy webinar

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Small business specialist accountant Sue Prestney believes that many small business owners who had delayed their sales through the GFC and its aftermath will now put their businesses on the market. And she expects the bubble of baby boomers entering retirement to significantly increase the volume of businesses changing hands.
Prestney, a principal with accountants MGI in Melbourne, emphasises the tax and superannuation advantages that eligible small business owners have regarding the potential tax and superannuation for certain proceeds from the sale of their businesses.
First, the sellers can significantly reduce or eliminate tax on the sale of active business assets if eligible for small business CGT concessions. (See Strategy 1.)
Second, super contributions from the proceeds of small business assets that qualify for the CGT small business 15-year exemption or retirement exemption are excluded from the non-concessional contributions cap up to a lifetime limit of $1.255 million (for 2012-13). (See Strategy 2.)
Some vendors of small businesses go a step further and sell or contribute their business premises to their self-managed super fund to provide concessionally-taxed or tax-free retirement savings, depending upon their circumstances. (See Strategy 3.)
Prestney says the ability to make extra-large super contributions “really gives small business owners an advantage” over other super fund members. And she believes the latest halving of the cap on annual concessional contributions for members over 50 further accentuates this advantage. (From July this year, the annual concessional cap for all members is $25,000 – no matter their age.)
Superannuation auditor Chris Malkin points out that a small business vendor who is eligible for the special $1.255 million lifetime limit using proceeds from the sale could contribute a total of $1.43 million into super in 2012-13. (His calculations take into account the standard concessional and non-concessional contribution caps). This is compared to annual contribution limits totalling $175,000 for other members.
Malkin, consulting auditor of specialist superannuation auditor Baumgartner Superannuation in Melbourne, emphasises that eligible small business owners potentially benefit from the “double-whammy” of the CGT concessions and the extra-large limit on their contributions.
Here are five strategies or tips for sellers of small businesses to consider regarding their tax and superannuation advantages:
1. Check eligibility for small business CGT concessions
These CGT concessions – together with the 50% general CGT discount (applying to individuals and trusts) – often remove CGT on the sale of small business assets.
Only proceeds from the sale of so-called “active” business assets are eligible for small business CGT relief. (As Sydney tax lawyer Robert Richards, principal of Robert Richards &amp; Associates, explains in his column <a href="https://revcorplaw.com.au/active-assets/" rel="nofollow">Fiscal Thoughts</a>, “active” assets are basically those used or ready to use in the carrying out of the business. They include tangible and intangible assets such as goodwill.)
And a small business is only eligible for the small business CGT concessions if its turnover in the preceding financial year was under $2 million or the total value of the owner’s assets and those of “affiliates” do not exceed $6 million.
The net market value of the owners’ business assets, personal bank accounts, personal investment portfolios and personal investment properties – together with those of their business partners, spouses, children under 18 or any entitles or people under their control – are included in the $6 million asset threshold.
The four small business CGT concessions are:
<ul>
<li>The 15-year ownership exemption. If your business has owned the asset for 15 years and you are over 55 and retiring, no CGT is payable on any assessable capital gain. Prestney says small business owners do not have to apply for any of the other small business concessions if qualifying for this one because it wipes out the entire capital gain.</li>
<li>The 50% “active asset reduction”. This is a crucial and fundamental tax break – including for those continuing in another business. It halves the capital gain.</li>
<li>The small business retirement CGT exemption. A capital gain from the sale of a business asset is exempt from CGT up to a lifetime limit of $500,000 for each individual owner. For a couple, this would mean a $1 million exemption. If you are under 55, the exempt amount must be paid into super.</li>
<li>The small business CGT rollover relief. As Paul Banister, director of taxation services for accountants, Grant Thornton in Brisbane, writes in the Australian Financial Planning Handbook, published by Thomson Reuters, that this is a “last resort” following the sale of “active” small business assets that are being replaced by other active assets. CGT is postponed until the replacement assets are eventually sold.</li>
</ul>
2. Understand the opportunity for some small business owners to make extra-large super contributions
As discussed, super contributions from the proceeds of small business assets that qualify for the CGT small business 15-year exemption or the retirement exemption – see Strategy 1 – do not count towards the standard non-concessional contributions cap up to a lifetime limit of $1.255 million (for 2012-13). This cap is indexed.


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3. Consider holding your business premises in your self-managed fund
Some small business owners sell the trading side of their business to an external buyer and then contribute or sell their business premises at market value to their self-managed super fund.
Under superannuation law, business real estate – such as an office, shop or factory – is one of the few types of assets that super funds are allowed to acquire from members.
Once the assets of the fund begin to back the payment of a superannuation pension (including a transition-to-retirement pension), fund income and capital gains are tax-free. And after members turn 60, superannuation pension payments are no longer taxable.
If you are contributing the property to your self-managed fund as a non-cash contribution – perhaps it is jointly owned with your spouse who is also a member of your super fund – you should not overlook the annual superannuation contribution caps.
Significantly, Sue Prestney of MGI says business owners who sell or contribute their business premises to their self-managed super funds as a separate transaction should:
<ul>
<li>Check their eligibility for any of the small business CGT concessions on the transaction. She says the contribution of business premises to a self-managed super fund would qualify as a disposal for the purposes of the CGT concessions.</li>
<li>Check their eligibility for the small business super contribution lifetime limit of $1.255 million (for 2012-13), as discussed in Strategy 2.</li>
</ul>
Prestney urges business owners who are considering contributing or selling their business premises following the sale of the trading businesses to first get professional advice regarding the timing of the transaction. And she emphasises that stamp duty would be payable on the transfer.
As Prestney explains, some small business owners choose to sell their business premises to their self-managed super fund and then contribute the proceeds to the fund. And, where eligible, they make use of the small business CGT concessions and the special lifetime limit on contributions from the sale of certain small business assets.
4. Beware of the possible negatives of relying on rent from business premises to provide retirement income
Financial planners and superannuation specialists typically urge fund trustees to recognise the possible negative consequences if their retirement savings are heavily reliant on the profitability of a single, high-value asset. A broadly diversified investment portfolio spreads the risks and opportunities.
Prestney says a consideration for sellers of small businesses who are thinking about contributing the proceeds and/or business premises to a super is increasing concern that the government may reduce some of superannuation’s tax concessions. This has been widely discussed in the press during recent weeks.
“I have a theory that taxpayers should work with the best concession they can get at the time,” Prestney comments. But she urges business owners not to overlook the reality that governments sometimes cannot resist changing tax concessions – particularly in regard to super.
5. Decide well in advance how you will eventually sell your business to maximise the tax and retirement advantages
Prestney warns taxpayers not to assume they are entitled to the small business CGT concessions because they have a small business. She says that business owners should take professional advice at least a couple of years before a sale to see if any changes should be made to become eligible.
For instance, company shares in a small business may be regarded as “active” assets for the CGT concessions if the market value of all of the company’s active assets is at least 80% of its total value. Prestney says some restructuring of a company’s balance sheet may be necessary to become eligible for the concessions in such circumstances.
This article originally appeared on <a href="https://www.smartcompany.com.au/index.php" target="_blank">SmartCompany</a>.
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Five tax strategies for small business owners selling up

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Just because the law allows investors to do something doesn’t, of course, mean it is a good idea.

This investment adage comes to mind with the recent final ruling from the tax office – in its role as regulator of self-managed super – relating to the acquisition, maintenance and improvement of geared properties in a self-managed super fund (SMSF).
In short, the ruling – clarifying much of the uncertainty about the commissioner’s interpretation of the SMSF gearing laws – is likely to encourage many more SME owners to at least consider holding their business premises in their family super funds.
Property Observer discussed the ruling in detail on June 5, including in regard to the gearing of business premises built over several titles and the <a href="https://www.propertyobserver.com.au/finance/five-strategies-for-investing-in-geared-property-through-an-smsf/2012060655012" target="_blank">undertaking of improvements to business and other properties</a>.
Particularly given the new ruling, it is crucial for business owners to carefully weigh up the advantages and disadvantages of holding their business premises in their SMSFs – whether or not the properties are geared.
The advantages are clear.
Business real estate, such as the premises of a family SMSE, is among the few types of assets that SMSFs are allowed to acquire from their members and other related parties. And business real estate is one of the few types of assets that funds can lease to related parties – including fund members and their businesses – without a limit on its value.
Your business pays a commercial rent to your SMSF. The rent is tax-deductible to your business and your SMSF pays tax at no more than 15% on the rent.
If your fund has borrowed to buy the business premises, the interest is tax-deductible.
Unrivalled asset protection is another advantage. If you later experience financial difficulties, superannuation assets (including business premises) are generally out of the reach of creditors if individual fund members are declared bankrupt – subject to the claw-back provisions in the Bankruptcy Act.
Further, no capital gains tax (CGT) is payable if your fund eventually sells the property when the fund’s assets are backing the payment of a superannuation pension.Bu
Some business owners, however, would tend to concentrate only on the advantages of acquiring their business premises through their SMSFs without giving sufficient attention to the possible disadvantages.
Here are six tough questions to ask yourself:
<h3>1. What happens if my business experiences financial difficulties?</h3>
Family SMSFs sometimes face the difficulty of having a financially-troubled family business – owned by the fund’s members – unable to pay the rent for fund-owned business premises.
Under superannuation law, fund trustees (who are the members themselves) must operate their super fund for the sole purpose of providing member retirement benefits. And that means pursuing a tenant for unpaid rent – even if that wayward tenant is the members’ own business.
“It can become very difficult because you are then wearing two hats,” says Martin Murden, a director of Partners Group, a financial services provider to accountants.
“You are the landlord in the superannuation fund and then you are the tenant, being a director of the business which is facing difficulties,” he adds.
“I have seen businesses, which have fallen into financially difficulties, not paying the true amount of rent to the super fund,” says Murden, the author of How to invest in property through your self managed super fund (released by Major Street Publishing).
These super funds had breached superannuation law by providing financial assistance to a related party.
The tax office, as regulator of self-managed super, has the power to strip an SMSF of its complying status.
In turn, the market value of a non-complying fund is taxed at the top marginal rate, less any non-concessional or undeducted contributions. This can remove almost half of a fund’s assets in tax, depending upon the circumstances.
And if your business cannot pay proper rent on a fund-owned business premises, your SMSF may have trouble meeting loan repayments if the property is geared. (See question four.)
<h3>2. What happens if I divorce?</h3>
Husband-and-wife business partners often arrange for their SMSF to acquire their business premises. The sad reality is that a marriage break-up will typically destroy the business partnership – in addition to the closure of the couple’s SMSF when their personal financial links are severed.
Frequently in such instances, the business premises are sold – perhaps in an unfavourable market – in order to split the super savings.
Of course, some husband-and-wife SMSFs would have sufficient other assets to enable one spouse to keep the property in his or her super fund and for other fund-held assets to go into the super account of the other spouse.
Couples who are considering acquiring the premises for their family businesses through their self-managed funds should keep in mind that the possibility that their relationship may fail is far from remote. Figures from the Australian Bureau of Statistics (ABS) suggest that 40% of marriages will end in divorce – a statistic that doesn’t include de facto relationships.
“Trying to disentangle superannuation assets [in a property settlement] can become very difficult,” says Murden.
He points out the need to split an SMSF’s assets such as business premises following a marriage breakdown do not solely involve husband-and-wife funds.
For instance, business partners may have set up an SMSF together to acquire their business premises. And the failure of the marriage or de facto relationship of one of the partners may trigger the splitting of superannuation assets.
In other words, the super savings of both business partners may be affected even though both may have been married to spouses with no involvement in the business.
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<h3>3. What if a member of my SMSF unexpectedly dies?</h3>
Depending upon the circumstances, the death of a fund member may force the sale of fund-owned business premises.
Under superannuation law, a fund must payout the superannuation death benefits of a deceased member to his or her beneficiaries. And funds often have to sell assets such as property to pay the death benefits.
The forced sale of business premises may, in turn, damage the commercial prospects of the family business.
Of course, the beneficiary of a deceased member’s super is often a surviving spouse who is also a member of the same SMSF. In such cases, there is perhaps no need to sell the business premises to pay death benefits.
Murden says some SMSFs deal with risk of having to pay death benefits by taking insurance policies on the life of each member.
A fund’s trustees would arrange for their SMSF to setup a special reserve account to pay the premiums on the life insurance policies. And the beneficiary of any payout upon death or permanent disability would be the SMSF through its special reserve account.
Under superannuation law, fund trustees must have an investment strategy that has regard to such matters as the risk of making an investment, the risks of inadequate diversification, and the liquidity of investments. Liquidity is a key issue when it is time to pay death benefits.
<h3>4. What if my SMSF defaults on a loan to buy my business premises?</h3>
The lender could sell the property in attempt to recover its debt (including any outstanding interest) along with the costs of selling the property and discharging the mortgage. Whatever is left is repaid to the fund.
Particularly if the property has fallen in value, the fund could lose capital and interest paid to the date of the default.
Sydney tax and superannuation lawyer Robert Richards suspects that some SMSFs will have difficulty making loan repayments after the halving from the concessional contributions cap for members over 50 to $25,000 a year from July. (Concessional contributions comprise salary-sacrificed and compulsory contributions as well as personally-deductible contributions by the self-employed and eligible investors.)
Craig Morgan, a director of mortgage broker SMSF Loans, points out that SMSFs tend to keep their loan-to-valuation ratio for commercial property to a maximum of 55%. With most of the loans Morgan arranges, the rent at least covers the interest payments.
 
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<h3>5. What are my possible CGT obligations when selling or contributing my business premises to my SMSF?</h3>
The increased value of the business premises during your personal ownership may be subject to capital gains tax (CGT) upon the transfer of its ownership – whether by sale or contribution – to your self-managed fund.
However, the small business CGT concessions on the sale of active assets of a business (such as its business premises) together with the standard CGT discount for assets owned for at least 12 months may eliminate any CGT – depending upon the circumstances. Get specialist tax advice on this point.
You should also be aware that some states apply stamp duty when a property owned by a member is contributed to a super fund.
“You may be eligible for the small business CGT concessions,” says Murden, “but speak to your tax adviser before doing a single thing. Get it wrong and you are going to pay a lot of tax.”
<h3>6. Are my retirement investments adequately diversified?</h3>
One of the negatives about owning your business premises in your SMSF is that your fund may have insufficient other assets to adequately diversify its portfolio against risks and to take advantage of non-property investment opportunities.
If a fund is poorly diversified, the retirement savings of the members depend on whether the property turns out to be a good investment. Of course, much will rely on the members’ personal circumstances including their other super and non-super investments.
This article originally appeared on <a href="https://www.smartcompany.com.au/index.php" target="_blank">SmartCompany</a>.
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Divorce, death, debt and default: Six questions SMSF trustees should be asking

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Those with DIY super should now be more confident for their self-managed super funds to borrow to acquire their business premises and other investment properties – provided the assets measure up as quality investments.
This follows the recent release of a self-managed super fund final ruling providing a detailed explanation of the ATO’s interpretation of the SMSF borrowing rules in relation to the purchase, maintenance and improvement of geared assets.
Undoubtedly, many SME owners have been reluctant to gear an SMSF to acquire their business premises because of uncertainty about how the ATO, as regulator of self-managed super, may interpret the borrowing provisions in superannuation law.
The uncertainty – which largely arose after the tightening of the SMSF borrowing laws several years ago – mostly related to repairs and improvements to geared property, as well as the gearing of properties involving more than one title.
Countless SME owners have long favoured holding their business premises in their family self-managed funds. But it is understood that doubt about the ATO’s interpretation of the SMSF borrowing laws has deterred some from proceeding with the strategy.
Business real estate – such as the premises of a family SME – is among the few types of assets that SMSFs are permitted to acquire from their members and other related parties. Further, business real estate is one of the few types of assets that funds can lease to related parties – including fund members and their businesses – without a limit on its value.
SMSF trustees in general are likely to feel more comfortable about borrowing to invest in residential and commercial property now that the ATO has issued this final ruling.
While the final ruling largely confirms the main points made in a draft ruling issued in September last year, <a rel="nofollow" href="https://law.ato.gov.au/atolaw/view.htm?docid=SFR/SMSFR20121/NAT/ATO/00001&amp;PiT=99991231235958">there are some significant clarifications and additional examples</a>.
Here are five strategies for SMSFs that are considering gearing to buy property:
<h3>1. Don’t waste time on an unnecessary clash with ATO</h3>
The final ruling provides wide perimeters for SMSFs wanting to buy, maintain and improve a geared property without breaching the borrowing laws or upsetting the regulator.
In short, this gives SMSFs a solid base to work within without having a costly and time-wasting dispute with the regulator.
Meg Heffron, co-principal of SMSF administration group Heffron, won’t go as far as saying that the final ruling provides a definite rule book for SMSFs with geared property – “but we are probably a lot closer to it than we have ever been”.
As Heffron says, circumstances will inevitably arise with geared SMSF properties that are not covered in the final ruling.
<h3>2. Borrow to invest with more confidence</h3>
This is because the final ruling confirms that the regulator will provide SMSFs with a fair degree of freedom within the borrowing laws when carrying out repairs and improvements to geared property.
Heffron is convinced that the ruling will give SMSFs more confidence about borrowing to invest in property.
This marks quite a turnaround for the prospects of holding geared property in SMSFs.
Almost two years ago, amendments to superannuation law toughened the laws about borrowing to invest through a SMSF. After July 7, 2010, an SMSF could:
<ul>
<li>Only acquire a single asset – not multiple assets – under a borrowing arrangement.</li>
<li>Could only drawdown on a loan (entered into after July 7, 2010) to make repairs, not improvements to a geared property.</li>
<li>Could not make a capital improvement to a geared asset that was extensive enough to have created a new or replacement asset.</li>
</ul>
Heffron says her “gut reaction” to the ATO’s initial views on these amendments were that it would be almost impossible for an SMSF to borrow to buy property. And she had regarded the ATO’s interpretation at the time as “a ban by stealth” on future gearing of property in an SMSF.
But the release of the final ruling together with its earlier draft has confirmed how ATO has taken a much more pragmatic and much less restrictive approach.
It is taking a more realistic attitude about what is a geared single asset, the difference between repairs and improvements, and about the extent of improvements will lead to a new asset being created.
 
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<h3>3. Feel more assured about borrowing to invest in properties covering more than one title</h3>
This can be a key factor for SMSF property investors because many properties are on multiple titles.
Take the classic example of an apartment that has a car space on a separate title or a factory that happens to be built over several titles.
Following the 2010 amendments, ATO’s initial view was that a property with, say, two titles equated to two separate assets and could not be acquired under the one borrowing arrangement.
This meant that many properties were simply considered unsuitable for gearing through an SMSF.
But under the draft and final rulings, Heffron says the ATO takes a broad interpretation of what is a single asset. “The ATO takes the view that where the two cannot realistically be separated, they will be treated as a single asset for this purpose,” she explains.
In the ruling, the ATO gives the example of a factory that is built over three titles would be treated as single asset that could be acquired under a single borrowing arrangement.
And the ruling gives the example of an SMSF that wants to gear to buy an apartment and its car park, that are on separate titles on the same strata plan, yet state law specifies that the two cannot be registered separately.
Under the final ruling, the ATO regards the apartment and its car park as a single asset that can be acquired under the same borrowing arrangement.
<h3>4. Carry out quite extensive repairs to geared property</h3>
The final ruling clearly explains the ATO’s views in details about how far repairs can extend before reaching the point of becoming improvements. This is a vital distinction for gearing a property through an SMSF.
Martin Murden, a director of SMSF consulting for services provider to accountants Partners Group in Melbourne, suspects that uncertainty about the ATO’s initial interpretation of the difference between repairs and improvements had caused much concern among SMSFs.
“I believe people can now determine before proceeding [with repairs or improvements] whether their actions are going to result in a problem with super legislation and regulation,” he says.
Under the 2010 amendments, as discussed earlier, SMSFs could only drawdown on a loan to buy and maintain an asset – not to improve it.
This made the different between repairs and improvements even more crucial. And the question immediately arose: When does building work on a geared property reach the point of going beyond a repair to become an improvement?
“These issues will always be regarded as a matter of degree,” comments Heffron, “but the ATO clearly envisages quite a wide range of activities which might incidentally add to the value of the property falling into the ‘repairs’ category.”
“Replacing or rebuilding with ‘modern equivalent’ materials will generally be considered a repair or maintenance, but replacing or rebuilding with superior materials is potentially an improvement,” she explains.
Crucially, a fund can use its own money to improve a property – within limits discussed in Strategy Five.
<h3>5. Carry out improvements to a geared property with more confidence</h3>
The challenge for SMSFs is to know how much they can improve a property, such as the fund members’ business premises, without reaching the stage of creating a new asset.
If improvements to a geared asset lead to the creation of a new or replacement asset, the borrowing arrangement would have to be dissolved.
“The ATO originally took the view that improving a property will necessarily trigger the replacement of one asset [the unimproved property] with another asset [the improved property],” says Heffron.
“Like the draft ruling, the final ruling takes a far more liberal position and indicates that, in the ATO’s view, not all improvements will necessarily result in a replacement asset.
“Essentially, the ATO now draws a distinction between improvements that ‘fundamentally change the character of that asset’ and those that do not.”
The ruling gives examples of improvements that would not be regarded as replacing a geared asset. For instance, the addition of several bedrooms, granny flat, extra bathroom, a garage or a swimming pool would be regarded as improvements that do not lead to the creation of a new or replacement asset.
But the ATO ruling states a new asset would be created if, say, a residential house was converted into a restaurant with such changes as the inclusion of a “fully functioning” commercial kitchen.
This article originally appeared on <a href="https://www.smartcompany.com.au/index.php" target="_blank">SmartCompany</a>.
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Five strategies for investing in geared property through an SMSF

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Veteran retail property and business professional Duncan Johnston is taking a truly counter-intuitive approach to investment opportunities in shopping strips. There are “marvellous buying opportunities” for cashed-up investors such as self-managed super funds, he says. 
Johnston and his associates manage many retail and commercial properties on behalf of more than 150 self-managed super funds (SMSFs) administered by Accounting Solutions Victoria and its financial planning arm, Financial Solutions Victoria. 
In another role, <city>Johnston</city> is co-owner of a handful of Collins franchises including the Hill of Content bookshops in Melbourne and Sydney. 
As a tenant, he is making the most of the difficult retail market by negotiating cut-price rents for Collins franchisees. And as an investor, he is buying strip shops on the cheap for his SMSF clients. 
When Johnston heard that 38 shops on Oxford and William streets in Sydney’s Paddington were reportedly vacant, his reaction was blunt: “It’s a real opportunity for investors.”  
 
Often a number of his SMSF clients join together to buy more expensive properties. “We are looking at properties costing $1 million to $5 million.” 
Johnston says the keys to successful buying in this market include paying the right price for quality property, carefully choosing tenants that will draw in customers, and then looking after those tenants in such ways as offering rent holidays if trading gets tough. 
The selection of tenants is all-important. <city>Johnston</city> favours what he calls lifestyle tenants that include home furnishings, food supply, entertainment, books and restaurants. 
A series of interviews by Property Observer confirm that property analysts and investors have a mixed and somewhat cautious outlook for retail property as an investment. 
Some analysts are convinced that the gloom-and-doom commentary directed at retail is overstated, pointing to some better-performing retail sectors and shopping areas as well as the expectations that retail spending will eventually recover. 
And some property specialists believe that investors who select their properties and tenants with extreme care can pick up bargains in this market – provided the purchase price allows for the possibility of more bad news. 
Here’s what five retail experts are saying: 
Property hunt
Johnston recently bid $2.6 million for a strip shop in Victoria’s Werribee on behalf of eight SMSFs who would have each put in $325,000. Although he decided not to match the winning bid of $2.85 million, the shop typifies the property that SMSFs are hunting for. 
The Werribee shop, which is located on the city’s main thoroughfare, is occupied by an IGA franchisee on a 10-year lease. And <city>Johnston</city> knows the shopping strip well because SMSF clients own a Centrelink shop a block away. 
IGA-type grocery businesses really appeal to <city>Johnston</city> as tenants for his SMSF landlords. He believes that the “IGAs of this world have really come into their own” as shopping habits change. 
“The average spend in a supermarket has gone from $70 or $80 down to $20 or $30 because more people are shopping once a day or every two days. And they like to buy near where they live or work.” 
For instance, <city>Johnston</city> describes the inner-<city>Sydney</city> suburb of Balmain – where he co-owns the Hill of Content bookshop – as a “classic” example of a suburb that could accommodate a small IGA supermarket in addition to the existing Woolworths. 
Although Johnston says that despite retail’s current woes, “it will be always there for the long term”. 
Johnston adds that while retail landlords might have received low yields in the past and relied on capital growth, yields have now reached 7% or 8%. “And while landlords may not be getting capital growth in the short term, we can see it expanding in the long term.” 
 
<hr class="system-pagebreak">
 
Pessimism ‘overstated’
Leigh Warner, director for research and consulting with Jones Lang LaSalle, says that while retailers and landlords face challenges, the pessimism in some circumstances is overstated. 
“Retail turnover will recover,” Warner emphasises. While he believes that the aggressive credit growth experienced between 1997 and 2007 will not return, growth in population and real wages will justify an annual increase of about 5% in turnover over the next decade. 
“Spending growth is also likely to get a slight boost at some stage over the next few years as a cyclical recover in confidence sees the household savings rate fall from around 10% of household incomes to settle around 7%,” he adds. 
Although Jones Lang LaSalle’s research doesn’t include shopping strips – it tracks sales costing $5 million plus – Warner says his comments on the outlook for retail cover retail in general, not solely shopping centres. 
Warner believes that the retail yield spread – the difference between the retail yields and the 10-year bond rate – appears to suggest there is “pretty attractive buying” for investors. 
He says the yield spread for neighbourhood centres, for instance, is the biggest he has seen since the downturn of the early nineties. Jones Lang LaSalle calculates that the yield gap for neighbour centres stood at 685 basis points in March 2012 compared to 412 basis points at the market peak in late 2007. 
“It is very hard to finance a property that is regarded as secondary,” Warner points out. But for investors that could get finance, “we think in some instances, there will be some good returns made”. 
Warner says risk-averse investors have largely focused on dominant regional centres and quality CBD properties, leaving a potential opening for investors in secondary properties including neighbourhood centres. 
Interestingly, Warner says that astute buyers may find value in shops that have had little spent on their maintenance and improvement. “There is a very shallow buyer pool for these investments.” 
Warner adds that active investors and those taking professional advice may do well by bringing the shops up to a satisfactory standard. He emphasises, however, that investors should be confident about the property’s potential value and the suitability of an area’s demographics. 
High risk in hard-hit areas
Managing director of SQM Research Louis Christopher warns that any investor buying a strip shop in, say, <street>Oxford Street</street>, Paddington or in nearby <place><placename>Double</placename><placetype>Bay</placetype></place> would be taking a big bet. “There is considerable downside risk.” 
Christopher believes there are safer options in retail areas that aren’t as devastated. 
“But it’s all about price,” he says. “If you are going to buy into market right now, make sure the price you pay reflects what’s happening in the markets and the potential for further bad news and downgrades. 
“Tenants in <street>Oxford Street</street>, Paddington, are demanding substantial cuts. I am hearing demands for 30-40% cuts. The price needs to reflect that.” 
Christopher argues that <street>Oxford Street</street> can no longer blame its woes on Westfield Bondi Junction. He points to retail in another inner-eastern suburb, Potts Point which is potentially affected by <city>Westfield</city> yet is doing well. 
“<street>Oxford Street</street> is a physical mess; it’s difficult to park and hard for pedestrians to cross.” Further, many of the shops were upmarket and discretionary. “And rents are too high.” 
Nevertheless, Christopher says a “contrarian view” would be to buy a shop in <street>Oxford Street</street>. “It could be the point to re-enter retail. Do your homework. Understand the demographics, understand where rents are, and what turnovers are really like. And snoop on the ground, speaking to shopkeepers.” 
Well-located shops
Ross Horsley, research analyst for LandMark White, says that although retail spending is down, well-located properties will still earn satisfactory returns for landlords. 
And with yields rising as values fall, Horsley says there could be good buying opportunities including along shopping strips. 
Horsley suspects that a large number of for-rent and for-sale signs in a shopping strip may point to a chance for an investor to make an offer that may just be accepted. 
While Horsley doesn’t envisage that <street>Oxford Street</street> in Paddington will return to its peak from a retail perspective, he agrees the area is likely to improve when shoppers begin to spend again. 
Horsley says that despite weak consumer spending and high savings rates, well-located small shops, particularly in central business districts remain popular with SMSFs. 
Strong sectors
Tony Sherlock, senior property analyst for investment researcher Morningstar <country-region>Australia</country-region>, says there are few signs of an improving outlook for retail property. 
However, Sherlock writes in a new report – Retail – What’s in store? – that weak sales are not being experienced across all retail. He says the better-performing categories are consumer staples, pharmaceuticals, cosmetics, cafes, restaurants and supermarkets. 
“This is shown in recent sales statistics for supermarkets, up 3.7% on a 12-month moving average basis; liquor, up 7.1%; pharmaceutical, up 7.3%; and cafe/restaurants, up 4.2%.” 
Sherlock says this “bodes well” for owners of smaller neighbourhood and sub-regional malls.
For end-of-financial-year tax tips for property investors, <a target="_blank" href="/news">sign up for our free webinar on Wednesday, May 23 at 12.30pm</a>.
 
 
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Retail properties going ‘cheap’  and showing strong yields – but  take extreme care

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Some investment commentators would no doubt believe that investors who negatively gear new investment properties and shares at this time must have rocks in their head.
Residential property prices are still falling in most Australian states, and the highly volatile local share market returned a negative 6.8% in the 12 months to February.
And the Reserve Bank’s latest margin lending statistics underline the extreme reluctance of many investors to borrow to invest. Australia’s total margin lending debt, taken to gear shares, plummeted to $15 billion by December last year – the lowest level in eight years.
Just think that the margin lending debt is 64% down on the record $41.6 billion reached in December 2007 on the eve of the GFC.
Unquestionably, it would be a contrarian approach to negatively-gear your new investments. But given the depressed state of the residential property and the local sharemarket, a case could be mounted for going against the herd of investors who are cutting back on both their investment and personal borrowing.
Further, there is another powerful reason why some older, contrarian investors may decide to take bigger risks by negatively gearing their investments.
The standard annual cap on concessional superannuation contributions by members over 50 – mainly salary-sacrificed, compulsory, and deductible contributions by the self-employed – will halve to $25,000 from July. This will diminish valuable potential tax breaks for middle and higher-income earners.
And in turn, more investors are likely to consider gearing property and shares (outside super and through self-managed super funds) as a way to partly address this looming reduction in tax breaks.
The halving of these caps means that super fund members with a marginal tax rate of 46.5% will lose tax savings of up to $7875 a year from 2012-13 while those with a 38.5% marginal rate will lose up to $5875 a year. Much will depend on an investor’s circumstances.
Gear shares
Negatively geared shares provide a relatively straightforward way to help maximise tax and investment opportunities for investors that understand the greater risks involved. In short, gearing magnifies capital gains and losses.
A share is said to be negatively geared when the interest on the investment loan exceeds its dividend income – and the shortfall is deductible against the investor’s other income.
However, a phenomenon in this volatile sharemarket is that the dividend yields of some popular quality shares are markedly higher than the interest payable on investment loans once the value of franking credits are taken into account.
Ross Bird, head equity strategist for investment researcher Morningstar Australia, points out that the average forecast grossed-up yield (which includes franking credits) of the four big banks is 10.1% for 2011-12, rising to 10.8% for 2012-13. (The forecasts are by Morningstar analysts.)
And Morningstar’s forecast grossed-up yield for dividend champion Telstra is a breathtaking 12.4% for both 2011-12 and 2012-13. (The yield was even higher before the recent rise in Telstra’s share price.)
Yet investors should expect to pay a little more than 9% for a variable rate margin loan and about 8.25 to 9% for a fixed-rate loan (<a target="_blank" href="https://www.ratecity.com.au/margin-loans/low-rate">depending on the terms and conditions</a>).
This means that a geared portfolio comprising of, say, the big banks and Telstra won’t be negatively geared. It will be positively geared with the dividends easily outstripping the interest on a margin loan.
However, grossed-up dividends are unlikely to exceed interest on a loan to finance a properly diversified share portfolio – depending, of course, on the level of gearing. Bird gives the example of what Morningstar classifies as its “sustainable portfolio”.
This regularly updated portfolio currently comprises: QBE, Ramsay Health Care, Telstra, Westfield Group, Westpac, Seek, JB Hi-Fi, CSL, Computershare, Commonwealth Property Fund, Cochlear, Bendigo Bank and APA. The portfolio’s forecast grossed-up yield is 7.4% for 2011-12, rising to 7.8% for 2012-13.
Bird describes this portfolio as “almost self-funding” if geared. “The portfolio is designed for moderate capital growth with a healthy income stream,” he explains.
Key points to keep in mind that even if a portfolio is not negatively geared, interest on the investment loan is tax-deductible – and the investor is getting exposure to the sharemarket when shares are still relatively cheap.
Gear property
If you believe that prices are beginning to bottom out in your selected market, now might be a good time to begin thinking about gearing a residential property investment over the next few months or so.
As reported by Property Observer, <a target="_blank" href="https://www.propertyobserver.com.au/residential/residential-investment-property-capital-city-house-rental-yields-from-best-to-worst/2012013153198">RP Data-Rismark calculates that the indicative rental yield for all capital houses was 4.4% in January</a>. This compares to an average variable rate of 6.99% charged by the four big banks for what interest-rate researcher Canstar regards as “outstanding value” <a href="https://www.canstar.com.au/home-loans/compare/variable-rate-investment-home-loan">property investment loans</a>.
Louis Christopher, managing director of SQM Research, believes another rate cut would be necessary to mark the bottom of the Sydney and Melbourne markets where auction clearances are lower than last year’s levels. However, he suspects that the Perth residential market has either bottomed or is near to it.
In all, Christopher says it is “not a bad time” for investors to begin researching for their next residential investment.
Gear through a SMSF
Sydney tax lawyer Robert Richards says gearing an investment through a self-managed super fund (SMSF) is a way to expand a fund’s assets despite the looming cut to the standard concessional contributions cap for members over 50.
Under superannuation law, SMSFs can borrow to invest subject to strict provisions. The geared asset must be held in a special trust until the final payment of the loan, and lenders cannot make a claim against any other fund assets in the event of a default.
There is plenty to consider. On one side, an SMSF-held asset will produce much lower negative-gearing tax benefits than if the asset was in the name of a top marginal taxpayer.
But once the investment’s income exceeds the interest debt, the rental income is taxed at a maximum of 15%. And the eventual capital gains are taxed at just 10% (if the asset is not sold within 12 months of purchase) or CGT-free if sold when the asset is backing the payment of a superannuation pension.
Finally, no investor should gear an investment without being aware of the risks. As Richards says: “While gearing increases the opportunity for greater capital gains, it also exposes you to greater capital losses".
This article originally appeared on <a target="_blank" href="https://www.smartcompany.com.au/index.php">SmartCompany</a>.
 
 
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Is it time to negatively gear property or shares?

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<a href="https://www.propertyobserver.com.au/tax/smsf-gearing-versus-personal-gearing-in-residential-and-commercial-property/2012030753629" target="_blank">Yesterday </a>we looked at an example of personal gearing versus SMSF gearing.
Before gearing a property, it is advisable to ask your accountant and/or financial planner to do some projections to determine whether you may be best to gear in your own name or through your SMSF. 
Points to discuss with your professional adviser when working out your investment projections for an investment property include: 
1. How long should I expect the property to remain negatively geared? Factors to consider here include the size of deposit paid, expected capital repayments and expected rental yield. Higher-income earners in particular will reap much bigger negative-gearing tax benefits than a concessionally taxed super fund. But once the investment becomes positively geared, rent is subject to lower taxes if it is within a super fund. 
2. What is the likely capital growth of the property? The greater the capital growth, the greater the capital gains tax (CGT) savings if held in a super fund – particularly if the property is sold when backing a superannuation pension (when CGT no longer applies). 
3. What if the property’s value falls during my ownership? Paul Banister, tax partner of accountants Grant Thornton in Brisbane, stresses capital losses in an investor’s own name are more valuable to offset present and future personal capital gains than losses in a super fund. And once the property is backing the payment of a pension, capital losses have no value because the asset is no longer taxable. 
4. Should I maximise my concessional super contributions? The making of more concessional contributions within your annual contribution cap to help with the cashflow of a fund-held investment property can provide immediate tax breaks. 
Concessional super contributions are taxed at just 15% – not the usual marginal rates applying to your personal income. This means, for instance, a taxpayer with a 38.5% marginal rate receives an instant 23.5% tax break. (Concessional contributions comprise mainly salary-sacrificed, compulsory and tax-deductible contributions by the self-employed.) 
5. Is it realistic to aim to sell an SMSF-held property in the CGT-free pension phase? The answer depends on a range of factors including your age. A young investor, for instance, may be most unlikely to keep a property until nearing retirement (when eligible for a transition-to-retirement pension from age 55) or in retirement. 
Banister says when making a decision about whether to gear a property in super or in your own name “involves trade-offs”. 
While gearing in your name can provide more immediate tax subsidies from personal negative gearing, holding property in superannuation may produce, according to the circumstances, more tax benefits over the long-term including the possible elimination of CGT. Another issue is that it costs more to setup a gearing arrangement through a SMSF than in your own name.
 
 
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Five questions to ask when deciding between SMSF gearing and personal gearing in property

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Should I gear into property in my own name or through my self-managed super fund? Which is likely to produce the best after-tax returns in my circumstances? 
These are burning questions as the popularity of borrowing to invest in property through self-managed super funds (SMSFs) steadily increases despite the uncertain outlook for residential and commercial property. 
The latest Self-managed super fund statistical report, from the Australian Taxation Office, estimates that SMSFs hold $60.4 billion in geared and ungeared direct property – up from a relatively modest $41.5 billion three years earlier. 
And Craig Morgan, a director of mortgage broker SMSF Loans, reports a spike in inquiries about gearing property following the release in September of a detailed draft SMSF ruling about repairing and improving geared real estate. 
Mark Gleeson, technical services manager for advice and distribution with the financial services group OnePath, suspects that some investors automatically assume that gearing through concessionally taxed superannuation will inevitably produce the highest after-tax returns. 
However, Gleeson emphasises that much will depend on the circumstances. In some cases, super will produce the best returns yet the opposite is true in other cases. 
In a simplified case study prepared for Property Observer, Gleeson looks at the example of an investor with a 38.5% personal marginal tax rate who bought a residential property three years ago for $655,000. He took a $500,000 loan with a 7.5% interest rate. 
It is assumed that the property produced an annual rent of $30,000 and increased in value by $95,000 during the three-year ownership. Apart from the initial instalment or deposit, no other capital repayments were made. 
The length of ownership has been set at an unusually low three years to simply illustrate some of the key points to think about with a gearing strategy – without complicating the issue by considering changes to the time value of money. 
By holding the investment outside super rather than through his SMSF, this investor produces by far the best negative-gearing tax benefits – $5,005 a year ($15,015 over three years) against $1,950 a year ($5,850 over three years). 
But once both capital gains tax (CGT) and negative gearing are taken into account, the picture really changes. By holding the property in super and selling when the asset is backing the payment of a superannuation pension will produce by far the best overall results in these circumstances – a $5,850 total tax benefit over three years. (Superannuation assets supporting pension payments are not subject to CGT.) 
By contrast, the property would have produced negative returns (once CGT is counted) if the property were geared in super and sold during the accumulation phase or held in the investor’s name. 
“[In this case study] there is no significant difference in total tax benefits between holding the property outside super and inside super if selling in the accumulation phase,” says Gleeson. But he emphasises that the projected tax results will depend much on the assumptions used. 
NEGATIVE-GEARING BENEFITS
<table border="1" cellspacing="0" cellpadding="0"><tbody>
<tr>
<td valign="top">
 
</td>
<td valign="top">
Inside super
</td>
<td valign="top">
Outside super
</td>
</tr>
<tr>
<td valign="top">
Rental income
</td>
<td valign="top">
$30,000 pa
</td>
<td valign="top">
$30,000 pa
</td>
</tr>
<tr>
<td valign="top">
Less interest
</td>
<td valign="top">
$37,500 pa
</td>
<td valign="top">
$37,500 pa
</td>
</tr>
<tr>
<td valign="top">
Less rates and
Maintenance
</td>
<td valign="top">
$5500 pa
</td>
<td valign="top">
$5500 pa
</td>
</tr>
<tr>
<td valign="top">
Net loss
</td>
<td valign="top">
$13,000 pa
</td>
<td valign="top">
$13,000 pa
</td>
</tr>
<tr>
<td valign="top">
Annual tax benefit
</td>
<td valign="top">
$1950 pa
(15% x ($13,000)
</td>
<td valign="top">
$5005 pa
(38.5% x $13,000)
</td>
</tr>
</tbody></table>
CGT LIABILITIES
<table border="1" cellspacing="0" cellpadding="0" style="width: 470px;"><tbody>
<tr>
<td valign="top">
 
</td>
<td valign="top" width="247">
Inside super
</td>
<td valign="top" width="180">
Outside super
</td>
</tr>
<tr>
<td valign="top">
CGT cost base
</td>
<td valign="top" width="247">
$655,000
</td>
<td valign="top" width="180">
$655,000
</td>
</tr>
<tr>
<td valign="top">
Sales proceeds
</td>
<td valign="top" width="247">
$750,000
</td>
<td valign="top" width="180">
$750,000
</td>
</tr>
<tr>
<td valign="top">
Assessable capital gains
</td>
<td valign="top" width="247">
$63,333
(2/3 x $95,000*)
</td>
<td valign="top" width="180">
$47,500
(1/2 x $95,000*)
</td>
</tr>
<tr>
<td valign="top">
CGT
</td>
<td valign="top" width="247">
<ul>
<li>$9,500 (15% x $63,333)</li>
</ul>
in accumulation phase
<ul>
<li>Nil in pension phase</li>
</ul>
 
</td>
<td valign="top" width="180">
$18,288 (38.5% x $47,5000)
</td>
</tr>
</tbody></table>
* CGT discount because property not sold within 12 months of purchase.
 
 FINAL TAX POSITION
<table border="1" cellspacing="0" cellpadding="0" style="width: 470px;"><tbody>
<tr>
<td valign="top" width="127">
 
</td>
<td valign="top" width="204">
Inside super
(Sold in accumulation phase)
</td>
<td valign="top" width="180">
Inside super
(Sold in pension phase)
</td>
<td valign="top" width="132">
Outside super
</td>
</tr>
<tr>
<td valign="top" width="127">
Negatively geared tax benefit (three
(three years)
</td>
<td valign="top" width="204">
$,5850
</td>
<td valign="top" width="180">
$5,850
</td>
<td valign="top" width="132">
$15,015
</td>
</tr>
<tr>
<td valign="top" width="127">
Less CGT
</td>
<td valign="top" width="204">
$9,500
</td>
<td valign="top" width="180">
Nil
</td>
<td valign="top" width="132">
$18,288
</td>
</tr>
<tr>
<td valign="top" width="127">
Total tax benefit
</td>
<td valign="top" width="204">
Minus $3,650
</td>
<td valign="top" width="180">
$5,850
</td>
<td valign="top" width="132">
Minus $3,273
</td>
</tr>
</tbody></table>
Source: OnePath
Before gearing a property, it is advisable to ask your accountant and/or financial planner to do some projections to determine whether you may be best to gear in your own name or through your SMSF. <a href="https://www.propertyobserver.com.au/tax/five-questions-to-ask-when-deciding-between-smsf-gearing-and-personal-gearing-in-property/2012030853630" target="_blank">Tomorrow we will look at five things to consider before you decide</a>.
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SMSF gearing versus personal gearing in residential and commercial property

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When veteran Noosa real estate agent Peter Butt looks at the modest Sandpiper residential and retail block on the beachfront in <street><address>Hastings Street</address></street>, he becomes nostalgic about earlier days at the <state><place>Queensland</place></state> resort. 
Butt, co-principal of Richardson &amp; Wrench Noosa, first came to Noosa on holiday 33 years ago, staying in a cheap one-bedroom flat at the Sandpiper. He never returned home to the eastern suburbs of <city><place>Sydney</place></city>. 
“I looked at the emerald green sea for the first time and saw waves breaking at the point – I used to be a mad surfer – and said to myself, ‘My God, I’ve found the Garden of Eden’.” 
Butt didn’t stay in the cheapest accommodation in <street><address>Hastings Street</address></street>. That distinction belonged to the camping area and caravan park, known as The Woods. “You could stay in The Woods for $50 a week then,” he says. 
From a location viewpoint, The Woods was the best place to stay in town. It had a double waterfront with the ocean on one side and the river on the other. And you could dine out on a Betty’s Burger for a $1. 
Fast forward to the present. 
Even a street protest – surely a one-off for Noosa – failed to stop the bulldozing of The Woods in the ‘70s. And the old Sandpiper is about to be demolished.
<img src="/images/stories/sandpiper2.jpg"> 
From 2013, a <a href="https://www.rwnoosa.com.au/28609/">new Sandpiper</a> (pictured above) will occupy the prized site, comprising three luxury full-floor apartments and a boutique facing the street. Richardson &amp; Wrench <a href="https://www.propertyobserver.com.au/queensland/sale-of-%2414-million-apartments-as-tide-turns-for-better-in-noosa/2011072650927">sold the two lower units off the plan to one buyer in July</a> for $14 million. And the penthouse is for sale at $9.5 million – by far the most expensive property on its books.
 <img src="/images/stories/noosa2.jpg">
And this year, $50 will buy little more than a decent meal in <street><address>Hastings Street</address></street> but not even put a dent in your accommodation bill. The most expensive rent being collected by Richardson &amp; Wrench this Christmas is $19,500 a week for a<a href="https://www.rwnoosaholidays.com.au/noosa_accommodation_view.asp?holidayID=474" target="_blank"> four-bedroom beachfront house </a>(pictured above) in Belmore Terrace, Sunshine Beach. It’s an $8 milion to $10-million property.
Butt says that although each of the 260 holiday rentals on his books is let between December 23 and January 17, rents have been discounted this year. “And there are still some great deals either side of the Christmas period.” 
There goes the neighbourhood
When David Edwards, licensee of LJ Hooker Palm Beach, began to sell real estate in Palm Beach 25 years ago, he remembers a “thriving community where people lived full time. Along the commercial stretch of <street><address>Barrenjoey Road</address></street>, there was a butcher, barber, chemist and petrol station. 
“Now you have real estate agents, coffee shops and restaurants,” Edwards says with some regret. And the population has become much more transient. 
Despite the stratospheric rents paid for high-end <city><place>Palm Beach</place></city> properties, Edwards says that on the non-water side of <street><address>Barrenjoey Road</address></street> facing Pittwater, it is still possible to rent a place for $1,500 to $1,800 over Christmas. “But on the other side of the road, you can spend $13,000, $15,000 and $18,000 a week.” And for houses facing the ocean, the dollars just escalate.
 {yoogallery src=[images/stories/september16kalula]}
Kalua on <street><address>Ocean Road (pictured above) </address></street> holds the record for the top Christmas rent for <city><place>Palm Beach</place></city>, renting in past years for $38,000 to $45,000 a week to the likes of Nicole Kidman, James Murdoch and John Cleese. The plantation-style house, owned by businessman Ian Joye, is currently on LJ Hooker’s website for $40,000 a week. However, Edwards says the Joye family is actually staying there over Christmas, and he believes some rental may be involved over this period. 
For Christmas 2011, life is a little tougher in rental paradise. “Our top rental this year is $25,000,” says Edwards. “There are probably about 20 properties in the $25,000-plus category and we have secured rentals on less than a handful.” 
Average rents a week for <city><place>Palm Beach</place></city> this year are $6,000 to $7,000 – down from $8,000 to $9,000. It seems that both owners and tenants are being more careful with their money. 
“In previous years, the bookings were two weeks or longer,” says Edwards. “This year, one week seems to be the more favoured tenancy. 
“The owners are being more frugal, not travelling overseas as much and are using their residences at <city><place>Palm Beach</place></city>.” 
And at the top end, owners tend not to cut rents to meet the market. “These are wealthy clients who don’t need to lease,” Edwards emphasises. “Some say, ‘If I am not going to get a good rate, we’ll leave it empty or use it ourselves’.” 
Upmarket fibro
When letting agent and landlord Christine Lewis bought her fibro beach house 10 years ago, she set about to recreate the settings of her childhood holidays – albeit in a more upmarket way. 
Lewis, proprietor of <a href="https://www.lovemelovemydog.com.au/" target="_blank">www.lovemelovemydog.com.au</a> – a booking agency for pet-friendly beach houses and owner of a beachfront rental property – used to spend every Christmas from the mid-50s at her grandparents’ fibro cottage at Surfers Paradise. 
“My grandfather would pick me up from the station in his Ford Prefect [a model that hasn’t been made for 50 years].” Her grandparents have long died and their little house has been demolished “take make way for a flash development”. 
Although Lewis’s website lists 2,500 pet-friend properties throughout Australia, the heart of her business is unquestionably Culburra on the NSW south coast. Culburra properties on her books rent from $209 to $1,000 a night. And this Christmas, the most expensive house is renting for $7,000 a week.
<img src="/images/stories/lovedog.jpg">
Her own property, <a href="https://www.lovemelovemydog.com.au/rent/nsw/south-coast/culburra-beach/on-the-beach/">On the Beach</a>, is rented over Christmas for $4,500 a week. Not bad for a fibro house, even though it’s right on the beach, cost more than $1 million and has about everything that opens and closes – for dogs and humans. 
“It’s probably politically incorrect,” Lewis says. “But I am one of those 1950s babies who isn’t scared of fibro or bindis.” 
It seems that Culburra doesn’t attract the celebrities of the fame of Nicole Kidman or John Cleese. However a regular tenant is Dr Katrina Warren, the TV vet from Harry’s Practice. And in pet-friendly circles, that’s true celebrity. 
*Author’s note
Michael Laurence is a long-time observer of Australia’s beach culture, particularly at <city><place>Palm Beach</place></city>. He learned to ride a surfboard at Kiddies’ Corner on the northern end of the beach – across the road from the pricey  Kalua, stored his surfboard next door under Willeroon – the long demolished 1920s Ocean Road house then owned by the Forsyth family (owners of Dymocks bookshops), and once interviewed Billy Connolly as the comedian came in from the surf.  
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Agents look back on summers past with nostalgia for cheap beachfront property

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As we look to what's ahead for 2012, Property Observer is republishing some of our most noteworthy stories of 2011.
 
The massive wave of baby boomers nearing retirement and a sharp fall coastal property values make an often overlooked tax and investment strategy much more appealing. 
This innovative strategy involves typically middle-aged couples buying their next investment property based on two fundamental criteria: its potential returns and its potential as a future retirement home. 
The new property is treated strictly as a negatively geared investment property for up to 20 years or so until the owners are ready to sell their existing family home and move into it. 
Depending upon the circumstances, the breaks from income tax and capital gains tax can be outstanding – and, perhaps, unexpected. 
Tax adviser Gordon Cooper is convinced that investing in the property in your own name is likely to produce far superior after-tax benefits than pursuing an identical strategy through a self-managed super fund. 
Cooper, the principal of Cooper and Co in Sydney, believes the strategy of buying a future retirement home – initially as a geared investment – is extremely timely given the rapid ageing of the population. 
Louis Christopher, managing director of property adviser and forecaster SQM Research, says the fall in the prices of coastal houses – which may be suitable for future retirement homes – could create good buying opportunities. 
Christopher points out, for instance, that Gold Coast prices are down by 15% from a high in 2008 and prices on the NSW Central Coast are down by 12% from a peak in June last year. 
“It is probably time to research these properties,” he says, “but their prices could fall a bit more.” 
These are the four steps involved in this strategy: 
1. Borrow up to entire purchase price
Cooper says borrowers following the strategy would typically take an interest-only loan to finance the property, using their existing family home as loan security. This will help maximise their tax benefits. 
2. Claim negative-gearing tax breaks
The annual deductible shortfall between the rent and the costs of interest on the loan, maintenance, council and water rates, and insurance could eliminate much of the tax on your salary. As Cooper emphasises, salaries are often at their highest in the last decade before retirement, making the negatively gearing tax breaks highly rewarding. 
3. Minimise CGT
When you ultimately make the property your permanent home, it will gain the CGT-exempt status of your main residence. However given the property will not be your home for some years, you are likely to face a CGT bill upon its eventual sale. 
Fortunately, there is a smart way to minimise that CGT liability. 
Say you owned the property for five years before moving in and making it your home for another 15 years. Cooper explains that you would be liable for CGT on a quarter of the assessable capital gain. 
But now Cooper adds a twist that may surprise many property owners. 
“In calculating your CGT liability [upon the property’s eventual sale], you can subtract a proportion of the non-deductible expenses,” he says. 
You would have incurred these non-deductible expenses after the property ceased being used as an investment and had become your home. And such expenses would include council rates and interest on any outstanding mortgage. 
Cooper says that after taking into account these non-deductible expenses, you might actually end up with a capital loss.
4. Consider the SMSF alternative
Some investors arrange for their SMSF to buy their future retirement homes as geared investment properties as an alternative to gearing the property in their own names. 
The apparent attractions of this SMSF strategy are two-fold. First, your super fund is likely to have enough money to pay the deposit or first instalment on the property. Second, you could arrange for your fund to eventually transfer the property into your name as an in-specie (non-cash) pension payment. 
Your SMSF would not be liable for CGT upon the transfer of the property into your name provided: 
<ul>
<li>The property was backing the payment of a superannuation pension. (Fund assets supporting a pension are exempt from CGT and income tax.) </li>
</ul>
<ul>
<li>The transfer of the property into your name as a pension payment did not result in the full pension account balance being paid out. (Strictly speaking, the benefit is treated as a partial commutation to a lump sum.) </li>
</ul>
However, Cooper is convinced that high-income earners in particular would gain higher after-tax returns from negatively gearing the property in their own names rather than gearing through a SMSF. This is despite the fact that the property will not be subject to CGT if eventually transferred into your name as a non-cash pension payment. 
“I think it is very hard to see how the maths can work to show it is an advantage to gear through your SMSF rather than in your own name,” Cooper emphasises. 
For more on self-managed super funds,<a target="_blank" href="http://propertyobserver.com.au/ebooks/16-questions-self-managed-super-fund-trustees-should-ask-before-investing-in-property"> download our free eBook</a>.
 
 
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Sea-changing could be a huge tax savings

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Developer GURNER™ Group has revealed $1.65 billion in residential sales nationally across the 12 months to December 2025, driven largely by the continued momentum of its Docklands wellness-focused precinct, Elysium Fields.

The sales result was generated across seven projects in Victoria and New South Wales, headlined by Elysium Fields, GURNER™’s $2.75 billion mixed-use precinct planned for Harbour Esplanade in Docklands.

The project has recorded more than $500 million in sales across the first three towers, equating to around 580 apartments sold.

The first tower, Helios, has now sold out of its 240 private residences, with GURNER™ preparing to release a premium penthouse collection comprising 15 three-bedroom penthouses in coming weeks.

[smartcode_project:default project_id=144441 project_image_fid=370975]

Elysium Fields is being developed on the long-held 20,000 sqm Docklands site at 208-226 Harbour Esplanade, which had remained undeveloped for more than two decades prior to GURNER™ taking over the project around four years ago.

Construction has now commenced across four towers ranging between 18 and 30 storeys, with Hamilton Marino and Maxcon appointed as builders.

Once complete, the precinct is expected to comprise around 1,100 residences, alongside retail, hospitality and public realm uses integrated throughout the site.

[smartcode_project:default project_id=144441 project_image_fid=370981]

Designed by Fraser &amp; Partners in collaboration with GURNER™ Design House, the project has been positioned around the developer’s broader focus on wellness-led residential living.

“We don’t sell apartments. We create a true luxury lifestyle that simply doesn’t exist elsewhere in the market today,” Founder and Executive Chairman Tim Gurner said.

“To deliver that requires an extraordinary level of detail, coordination and discipline across multiple verticals, from design and hospitality through to wellness and service.”

“We’ve always believed that living extends far beyond the physical residence. It’s about how you feel the moment you arrive, how you live day-to-day, and the ecosystem that supports that.” 
[smartcode_project:default project_id=144441 project_image_fid=370977]

The project’s design places a heavy focus on landscaping, wellness amenities and biophilic design principles.

Plans include around 3,700 sqm of landscaped gardens and open space throughout the precinct, alongside a retail and dining offering spanning approximately 5,000 sqm.

The broader public realm strategy centres around what GURNER™ describes as the “Path of Life”, an urban forest and landscaped pedestrian environment intended to connect the various buildings and wellness spaces across the precinct.

The apartments themselves will incorporate a range of wellness-focused inclusions, including purified air and water systems, circadian lighting, antimicrobial surfaces, and optional in-home wellness upgrades.

[smartcode_project:default project_id=144441 project_image_fid=370980]

Gurner said the company’s experience through its Saint Haven wellness clubs had directly informed the residential offering now being incorporated into Elysium Fields.

“We’re seeing a clear global shift toward longevity, performance and proactive health,” Gurner said.

“Our role is to deliver that in a way that feels seamless, highly private and beautifully resolved within the environments we create.”

A large component of the wellness offering is planned through the resident amenity and health facilities proposed within the precinct.

That includes plans for bathing and recovery facilities spread throughout the towers, incorporating mineral pools, saunas, steam rooms, flotation therapy, red light therapy and wellness lounges.

The developer is also seeking approvals for what it describes as a “reverse ageing medical clinic” within the precinct.

[smartcode_project:default project_id=144441 project_image_fid=370978]

According to project information released by the group, the proposed facility would include cryotherapy, IV infusion therapy, infrared and dry saunas, PEMF beds, MRIs, DEXA scans, brain scans and blood analysis services.

Within the first tower, Helios, residents will also have access to a dedicated amenity offering known as the Sky Private Club.

The upper 15 levels of the building will include private lounges, dining spaces, rooftop amenities and optional private wellness studios integrated within residences.

The Helios tower itself comprises 260 apartments ranging between 60 sqm and 300 sqm, including a collection of penthouses.

That includes a planned two-storey penthouse spanning around 600 sqm with uninterrupted bay views.

The Elysium Fields precinct is being delivered in partnership with Digital Harbour Holdings, a consortium that includes the Liberman family, which controls the development rights across the Docklands site.

[smartcode_project:default project_id=144441 project_image_fid=370979]

The sales result comes as GURNER™ continues expanding its national development pipeline beyond Victoria.

“We have a strong pipeline across Australia and are now focused on scaling into key markets including New South Wales and Queensland, while continuing to build on our Melbourne base,” Gurner said.

“We currently have more than $3 billion in the market, growing to over $5 billion by October, and expect to materially outperform last year in the 2026 calendar year.”

The result also reflects the continued strength of the upper-end apartment market in Melbourne, particularly for owner-occupier-focused product with large-scale amenity and lifestyle offerings.

[smartcode_project_cta:default project_id=144441]

Record result anchored by the Group’s “utopian” Elysium Fields precinct – defying market headwinds in Docklands.

Joel Robinson

Elysium Fields drive Gurner to $1.65 billion in apartment sales over 2025

National Australia Bank (NAB) will fund <a href="https://www.apartments.com.au/new-apartments/palmera-residences-gold-coast-18-garfield-terrace-surfers-paradise-qld-4217">Palmera</a>, a $1 billion, 52-level luxury residential tower being developed by Central Equity in one of the Gold Coast’s most tightly held coastal locations at Northcliffe.

The project, launched recently by <a href="https://www.apartments.com.au/developers/central-equity">Central Equity</a>, one of Victoria’s largest private residential developers, comes at a time when construction funding for large residential developments has become increasingly competitive as lenders tighten exposure to the sector.

Multiplex has been appointed the builder, and construction is now underway.

[smartcode_project:default project_id=108274 project_image_fid=365784]

Since its first project, Central Equity has delivered more than 85 residential developments with a combined end value exceeding $8 billion.

Palmera reflects Central Equity’s growing focus on the Gold Coast luxury apartment market and continues a relationship between Central Equity and NAB that dates back to the late 1980s, when the bank funded one of Melbourne’s earliest inner-city residential towers at a time when high-rise apartment living in the CBD was largely unproven.

“NAB’s funding of Central Equity’s $36 million CBD development in the late 1980’s to the financing of the billion-dollar tower today highlights the long-term relationship between the two organisations in delivering major residential projects” said Central Equity Founder and Chairman Eddie Kutner.

He said NAB’s early support was instrumental in helping establish the company’s development model.

“When we commenced our first residential tower in the late 1980s the concept of funding off-the-plan apartments was still largely untested in Australia,” Kutner said.

“NAB recognised the opportunity early and supported the project when others were uncertain. That relationship has now continued for more than 37 years across many developments.”

[smartcode_project:default project_id=108274 project_image_fid=365771]

Central Equity was established in 1987 when Melbourne’s CBD and Southbank precinct were still dominated by warehouses and commercial buildings. Fewer than 100 residents lived in Southbank at the time, and large-scale residential development in the inner city was not widely considered.

Recognising changing demographics and lifestyle preferences, the company began developing high-rise residential projects designed to bring permanent residents into the city centre.

Central Equity has provided accommodation for approximately 40,000 residents across Melbourne’s CBD and Southbank, while also incorporating supporting infrastructure including essential lifestyle facilities like retail spaces, childcare facilities and neighbourhood activity centres.

Central Equity has spent many years assembling the Palmera development site on the corner of Garfield Terrace and Frederick Street in Northcliffe, creating a supersite of around 3,300 sqm.

The developer said the Palmera apartment tower reflects its long-term view of the Gold Coast as a growing and increasingly diversified economy.

[smartcode_project:default project_id=108274 project_image_fid=365768]

Supported by infrastructure including the light rail network, major road upgrades expanded education, hospital and medical facilities and continued expansion at the Gold Coast Airport with more internation and domestic flights.

Positioned in the tightly held Northcliffe precinct, the 52-level tower will deliver 347 apartments, targeting buyers seeking a high-end coastal lifestyle, from downsizers to interstate investors.

Designed by Marchese Partners with interiors by DBI, Palmera has been conceived as a next-generation residential offering, featuring a collection of oversized apartments, with premium three-bedroom residences offering sweeping northern views stretching from Surfers Paradise through to Burleigh Heads.

[smartcode_project_cta:default project_id=108274]

NAB funds $1 billion Surfers Paradise apartment development, Palmera

Two years after completing one of the newest developments in North Sydney, developer <a href="https://www.apartments.com.au/developers/aqualand-australia">Aqualand</a> is turning its attention to the rapidly evolving St Leonards apartment market.

The developer, which completed AURA by Aqualand on North Sydney's Walker Street, has lodged plans for a 5,918 sqm site at <a href="https://www.apartments.com.au/new-apartments/33-37-herbert-street-st-leonards-nsw-2065">33-37 Herbert Street, St Leonards,</a> seeking approval for a pair of residential towers rising above a shared podium opposite Royal North Shore Hospital.

The proposal forms part of the broader transformation underway across the St Leonards-Crows Nest precinct, where former industrial and commercial sites are increasingly being redeveloped into high-density mixed-use projects tied to major transport infrastructure.

<img alt="Aqualand" data-entity-type="file" data-entity-uuid="2cc428cf-fe70-4cac-9cd5-264ad53af62c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.51.56%E2%80%AFAM.png?VersionId=otKSnHtbjAvAddOnovyXQMgcAwE6DMe1" />

According to the planning documents, the site sits “within the St Leonards–Crows Nest Strategic Centre, identified by the NSW Government as a key area for accommodating future jobs and housing across Sydney.”

The proposal has been designed by fjcstudio, formerly FJMT Studio, and is being progressed through the State Significant Development pathway due to its scale and affordable housing provision.

The scheme would comprise 413 apartments, including 46 affordable housing units, alongside retail and commercial uses fronting Herbert Street. The project would also include communal open space, landscaping, a swimming pool, gymnasium, children’s play areas and podium-level resident amenities.

Planning documents show the development would consist of a part-13, part-39 storey tower form positioned above a four-storey podium.

“The development comprises a unified podium that activates the street interface, and two setback towers to accommodate new housing supply while maintaining an appropriate human scale at ground level,” fjcstudio noted in its Design Report.

The northern and southern towers have been shaped to respond to the surrounding skyline while also limiting overshadowing impacts to nearby public open space, particularly Talus Reserve.

The design report said the differing tower heights were intended to “contribute to a varied skyline while responding to the surrounding built form context and solar access considerations.”

<img alt="Aqualand" data-entity-type="file" data-entity-uuid="36da62dc-ff9e-41f2-a7e3-7be38373751c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.51.45%E2%80%AFAM_0.png?VersionId=Mo6Rp2r.XRLTzIfg_PEEpw8NepDH8UBs" />

The site sits directly opposite Royal North Shore Hospital and within walking distance of both St Leonards Station and the new Crows Nest Metro station.

While the site itself sits just outside the formal Crows Nest Transport Oriented Development boundary, the planning documents repeatedly reference its alignment with the broader TOD objectives reshaping the Lower North Shore.

“The site is located adjacent to St Leonards Station and in close proximity to Crows Nest Metro which is within the Crows Nest Transit Orientated Development Accelerated Precinct which has been identified by the NSW Government to support housing delivery,” the Design Verification Statement noted.

According to fjcstudio, the project has been designed to respond to the broader transition occurring across St Leonards, where increasing residential density is being concentrated around transport infrastructure and employment hubs.

“The broader precinct is undergoing significant change, with a mix of existing mid-rise buildings and newer high-density developments,” the report stated.

“Recent and approved projects indicate a consistent shift toward taller built form, typically organised as tower-and-podium typologies with more active ground levels.”

The proposal includes close to 6,000 sqm of retail and commercial space across the ground floor and podium levels, designed to create a more activated street edge along Herbert Street.

Aqualand’s plans would also introduce a landscaped podium shared between the two towers, with communal open space in the form of a podium rooftop designed to support resident interaction and improve urban greening outcomes. The scheme would also introduce pocket parks at the northern and southern ends of the site, including a landscaped area at the corner of Herbert and Ella streets designed to improve pedestrian amenity and soften the streetscape.

&nbsp;

The proposal is being progressed through the NSW Government’s Housing Delivery Authority pathway, which was introduced to accelerate housing supply across the state. The application was declared State Significant Development in April 2025 following an expression of interest process.

<img alt="Aqualand" data-entity-type="file" data-entity-uuid="faf6d97d-2671-454f-b85a-fe1c6a7be608" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.51.49%E2%80%AFAM.png?VersionId=diVd28OBVr5.YV.7prrOz.uAanwwwm7a" />

St Leonards has been particularly active with new developments in recent weeks. Developer SP Setia’s <a href="https://www.apartments.com.au/news/nsw/first-look-sp-setia-targets-st-leonards-skyline-with-40-storey-tod-tower">plans for a new 42-storey tower</a> recently went on exhibition through the same pathway, while <a href="https://www.apartments.com.au/news/nsw/first-look-stockland-plans-52-storey-538-apartment-st-leonards-tower">Stockland’s 52-storey tower proposal</a> was also recently unveiled.

Aside from the St Leonards project, which is expected to take around nine months to move through the approvals process ahead of a potential 2027 launch, Aqualand is also preparing to launch Boronia, a new apartment project in Roseville comprising around 111 apartments on Larkin Street.

The developer also has approvals in place for the next stage of the Barangaroo precinct, which will feature new residential, retail, hospitality and community uses, alongside a new metro entry across the five-hectare site.

More than 50 new retail destinations are planned for Central Barangaroo, alongside a 270-metre-long boulevard connecting Hickson Park to Nawi Cove. Together with Harbour Park, more than 50 per cent of the precinct will comprise public open space and parkland.

First look: Aqualand joins St Leonards apartment party

<section data-scroll-anchor="false" data-testid="conversation-turn-5" data-turn="user" data-turn-id="e65dbe94-e3b6-47f7-b62a-9cbb30c9bf79" data-turn-id-container="e65dbe94-e3b6-47f7-b62a-9cbb30c9bf79" dir="auto">Time &amp; Place’s plans to transform the former David Jones factory building in Surry Hills into a mixed-use residential precinct have gone on exhibition through the NSW Government’s In-fill Affordable Housing pathway.</section>

<section data-scroll-anchor="false" data-testid="conversation-turn-6" data-turn="assistant" data-turn-id="request-WEB:f4d533b7-64a5-413d-86fd-5c99649c2b73-2" data-turn-id-container="request-WEB:f4d533b7-64a5-413d-86fd-5c99649c2b73-2" dir="auto">
The Marlborough House proposal, lodged for the <a href="https://www.apartments.com.au/new-apartments/marlborough-house-47-97-marlborough-street-surry-hills-nsw-2010">47-97 Marlborough Street</a> site, would see the adaptive reuse of the heritage-listed warehouse building alongside the construction of new residential additions and a separate apartment building on the northern portion of the site.

The proposal seeks approval for 172 apartments across three buildings, including 15 per cent affordable housing managed by a community housing provider for at least 15 years from occupation.

<img alt="Marlborough" data-entity-type="file" data-entity-uuid="5d1d3c2a-bf13-47d6-a335-7c01102cdee1" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.29.36%E2%80%AFAM.png?VersionId=cjMYrbR.BLUlWH4dar0RVDDo0bG.u2YT" />

Interior view from the Northern Building Penthouse overlooking the park

&nbsp;

The redevelopment is planned for the prominent 3,413 sqm site bounded by Marlborough Street, Goodlet Street and Lansdowne Street, directly opposite Eddie Ward Park and around 200 metres from the Surry Hills light rail stop.

Time &amp; Place acquired the former David Jones building in 2024, marking the first time the property had changed hands in around 50 years.

Designed by Wardle, the proposal centres around the adaptive reuse of the former David Jones factory, originally constructed between 1913 and 1935 in the Inter-War Chicagoesque architectural style.

Wardle noted in its Architectural Design Report that the building “occupies a significant place in the industrial and cultural history of Surry Hills” and at its peak was “the largest department store manufacturing facility in Australia, employing over 800 people and fuelling the growth of Sydney’s fashion and retail industries.”

The practice said the project positions itself “not as an isolated intervention, but as a contributor to the civic, social, and architectural grain of the precinct.”

The proposal would deliver 75 apartments within the retained southern heritage building, 59 apartments within the central addition, and a further 38 apartments within the new northern building fronting Lansdowne Street.

Planning documents show the scheme would comprise a mix of heritage apartments, new-build apartments, townhouses and penthouses.

<img alt="Marlborough" data-entity-type="file" data-entity-uuid="57758518-40a3-4b83-958c-d06e96a2cffa" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.29.42%E2%80%AFAM.png?VersionId=VerlX9ST5xgBi8.1_YRsqdWTJeT6ygjs" />Interior View of the Heritage Building Apartment

The development would also include a ground-floor retail tenancy on the corner of Marlborough and Lansdowne streets, rooftop communal open space, a landscaped pedestrian link along the western edge of the site, and basement parking accessed from Lansdowne Street via a car stacker system.

&nbsp;

The scheme emerged from a competitive design process run by Urbis, with Wardle ultimately selected as the winning architect ahead of FJC Studio, TZG, Architectus and Wilkinson Eyre.

The Design Integrity Panel later described several aspects of the Wardle scheme as fundamental to the project, including “the stepped character of the new addition to the north of the site”, the landscaped western pedestrian link, and the “garden arrival” experience separating the original Marlborough House from the heritage addition.

Wardle’s design heavily references the site’s industrial and heritage history, while also responding to the surrounding Surry Hills streetscape.

The Architectural Design Report describes Surry Hills as “a finely grained neighbourhood with beautiful and expressive brickworks throughout the suburb,” with the proposal introducing a material palette intended to sit comfortably alongside the existing warehouse fabric and neighbouring terraces.

The report also outlines the project’s relationship with Eddie Ward Park and the broader landscape context of the area.

“Marlborough House occupies a site of deep cultural memory and the neighbouring Eddie Ward Park is of local ecological significance, where natural systems, topography, and stories have long shaped human experience,” Wardle noted in the report.

The architects said the proposal sought to “rebind built form to Country” through landscape, materiality and the adaptive reuse of the heritage structure.

<img alt="Marlborough House" data-entity-type="file" data-entity-uuid="9ae3f2f9-c85f-477a-a6f8-b43f6cb97c41" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%209.29.53%E2%80%AFAM.png?VersionId=B.qUCLqRvJOR.n9CvYcTpaknIX9LuqKZ" />

The project is also being progressed under the NSW Government’s in-fill affordable housing provisions, allowing developments that include affordable housing to access additional height and floor space incentives.

Under the plans, 2,593 sqm of the project’s floor space would be dedicated to affordable housing, slightly exceeding the required 15 per cent threshold.

In its Design Excellence Strategy, Urbis said the project aimed to “sensitively adapt and enhance the heritage-listed building on site through alterations and additions that preserve its historical significance” while delivering “high-quality market and infill affordable housing development in Surry Hills.”

Time &amp; Place has been one of the most active developers nationally in the last 12 to 24 months. Late last year they completed&nbsp;The Queensbridge in&nbsp;<a href="https://www.apartments.com.au/developments/southbank-vic-3006">Southbank</a>, a mixed-use tower with 353 apartments and a hotel. They are currently selling Park Modern, 246 apartments near the famous Botanic Gardens in&nbsp;<a href="https://www.apartments.com.au/developments/south-melbourne-vic-3205">South Melbourne</a>, and have future projects, <a href="https://www.apartments.com.au/new-apartments/the-wilmot-173-burke-road-28-hope-street-glen-iris-vic-3146">The Wilmot</a>&nbsp;in&nbsp;<a href="https://www.apartments.com.au/new-apartments/glen-iris-vic-3146">Glen Iris</a>, the redevelopment of the Northcote Plaza, and another tower in South Melbourne.

The developer broke into Sydney just a few years ago with Two Tides in Manly. They have another project nearby, which is at the ultra-luxury end of the market on&nbsp;<a href="https://www.apartments.com.au/buildings/shoreline-manly-beach-89-90-north-steyne-manly">North Steyne</a>, fronting the beach.

It is also continuing to work through the <a href="https://www.apartments.com.au/news/nsw/first-look-time-place-settles-on-design-for-the-chimes-potts-point-redevelopment">redevelopment of The Chimes building</a> on Macleay Street in&nbsp;<a href="https://www.apartments.com.au/developments/potts-point-nsw-2011">Potts Point</a>, as well as a project on <a href="https://www.apartments.com.au/news/nsw/time-place-to-take-on-mosman-apartment-market">Mosman's Redan Street</a>.
</section>

First look: Time & Place unveils Marlborough House redevelopment designs for former David Jones warehouse in Surry Hills

The residential transformation of St Kilda Road is set to continue into with more new apartment plans for the sought-after boulevard.

Wing Tai Asia has lodged plans for a major residential tower at 464-466 St Kilda Road, replacing the former VACC House with an 18-storey mixed-use development designed around a retained heritage podium and a sculpted contemporary tower.

The proposal, prepared under Victoria’s Significant Residential Development with Affordable Housing pathway, would deliver 325 apartments and ground-floor retail across the prominent 4,653 sqm boulevard site in Melbourne’s St Kilda Road North Precinct.

The project centres on the adaptive reuse of the site’s heritage-listed VACC Building, an eight-storey office designed by Bernard Evans that has occupied the address for decades. Planning documents state the development would involve “carefully dismantling and conserving off-site the original metal fabric of the podium visible from St Kilda Road,” before reinstating it as the defining frontage of the new scheme.

Above the restored podium, Wing Tai is proposing a curvilinear residential tower. The scheme includes 172 one-bedroom apartments, 63 two-bedroom apartments, 66 three-bedroom apartments, and 24 four-bedroom apartments, alongside two ground-floor food and beverage tenancies fronting St Kilda Road.

The tower has been designed with substantial articulation and variable setbacks to minimise perceived bulk and maintain view corridors along the boulevard. Urbis, which prepared the planning report, said the design “has been significantly articulated through a curvilinear design” with “an interplay with materials, façade expression and depth” to create visual separation and visual interest.

The proposal also includes 254 basement car spaces, landscaped pedestrian links connecting St Kilda Road and Queens Lane, and a biophilic landscape strategy featuring canopy trees, raised planters, cascading greenery and a glass oculus pool overlooking the eastern frontage.

Planning documents confirm the $270.1 million development will contribute 3 per cent of project costs to the Social Housing Growth Fund as part of the application process.

Wing Tai acquired the St Kilda Road property in 2018 alongside Abacus Property Group for $95.38 million, before later consolidating ownership of the site. The property previously served as the Victorian Automobile Chamber of Commerce headquarters for around 60 years.

The transformation of the St Kilda Rd boulevard is already beginning to materialise, with a number of high-profile projects recently completed, launched, or approaching launch as developers continue to back the long-term appeal of the precinct.

Among the most notable recent completions is Louise by Samuel Property Group, just off the strip on Queens Lane, the same pocket Hirsch &amp; Faigen recently launched The Queensbury. Mirvac is too on the same street with The Albertine, which is approaching completion.

Dexus recently secured approval for its slice of St Kilda Road, while Gurner also has approved plans for the precinct.

Michael Laurence

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