Hi Everyone,
Would some one be able to help with the following situation?
My wife and I have purchased a new house for $370,000 which we want to move into.
Our existing PPOR of residence has only $25,000 owing from a $140,000 loan, we would like to rent this place out. ( title and Loan are under both our names )What we want to do is to negative gear our existing PPOR that we are renting out and this is the way I am thinking of going
about it.Our existing PPOR is worth approx $350,000
I buy her out and I get a Loan ( Interest only) for $ 175,000 and pay her out. ( she puts this money into the loan on our new PPOR )
So If we rent it out for $220 a week we get approx $10560 in rental income
And interest on $175000 at 6.82% is $11,477 for the 1st year at least
I get to deduct agents fees, depreciation and Rates as well.So I effectively would make a loss. ( which is ok in this case )
So question is.
1) How do I go about buying my wifes half off of her?
I rang the State Revenue Office and they say that there is no Stamp duty payable for transfer of Land to spouses in VIC
Do I need to see a solicotor or convenycer or can I do it by myself?2) Is the Tax office ok with this sort of thing?
3) Does doing this ( ie buying her half off her ) have any effects on Capital Gains when I sell the house 1st or 2nd house?
4) Do I need to prove to the tax office that my old house is worth $350,000?
Hi
1) You are buying and selling property so you must use a conveyancer/solicitor unless you know how to do this yourself. Maybe you could use one of those conveyancing kits??
2) I think so. Many people have done it. But maybe they could argue it was done just to avoid tax. Do you have any other reasons for doing so, such as asset protection?
3) I don’t htink so. You should be able to claim it as your main residence until you move out (or maybe longer). Couples only get one main residence between them, so it wouldn’t make any difference.
4) If this house is going to become a rental, then you may want to be able to prove the worth of your house at the date it becomes a rental. So collect some evidence and file it just in case.
3)
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Terry,
Thanks for the reply, especially on the use of a DIY
conveyancing kit, I don’t really want to pay a conveyancer $400-%500 dollars to transfer the name of the property if I’ve got all the title , etc documents already ( when we first purchased the property)The tax office is okay with you doing this provided the valuation is fair. (i.e. independent valuation).
There are no capital gains tax implications however your cost base will become the valuation of the property once it is available for rent.
Cheers,
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.auHi Mark,
Is a bank valuation considered an “independent valuation”?
I think it would be – do you have a copy?
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
The bank valuation cannot be relied on by any other party besides the bank it was ordered by. It is a valuation for mortgage purposes only.
It would be safer getting your own valuation. This should not be more than $300 – $400 for a standard property.
Robert Bou-Hamdan
Mortgage AdviserOops looks like I’ve got two conflicting opinions here?
Terry to answer your question , no not yet, I do intend on getting the bank to value it as I am going to get a loan to buy out my wifes half of the property ( see above).
All the ATO is interested in is establishing a market value for your property. There are various ways you can do this, including getting an agent’s opinion, keeping records of comparable sales etc. Having a valuation will only add to your proof. The valuation being for mortgage purposes only should not matter. It is up to how confident you feel you would be during an audit – if you could justify the price.
I asked if you had a copy as most lenders will not actually give you a copy of the valuation.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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