I have a relative who is heading for greener pastures overseas and has suggested I purchase their PPOR and other personal belongings (furniture, vehicles, boat, jewellery, etc) as a package deal.
The price is pretty fair and has sparked my interest. If I go ahead I would used the house as an investment property and sell some of the personal belongings privately.
As this is a package deal I’m not sure how I best structure the cost of house in regards to stamp duty (the lower the better I assume), Capital Gains Tax (if I decide to sell in 5-10 years), property insurance, etc, etc.
Given the fact I can pay for the personal items at a later date should I state the final cost of the house low or high?
For example: $400,000 PPOR and $10,000 for the personal items or $360,000 PPOR and $50,000 for the personal items.
Depending how I structure the final breakup costs I have a 20% deposit for the PPOR but would need to obtain loan to cover the other costs.
What are you thoughts?
Thanks.
John
Hi John,
You have a 20% deposit – is this based on a purchase of $360k or $400. If you purchase a property for $360k and its worth say $400k then the bank will take the $360k as the value of the property (if not less if there is something blatanly wrong with the property). This need pushes you into LMI territory which is another ball game. You need to factor this and ensure that you meet the LMI conditions.
The second thing to consider is the CGT – ie if you purchase the property for $360k instead of $400k then the CGT payable is on the difference of the amount you purchased.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Thanks Shahin.
I will obtain an independent valuation for the property. Looking around the area I believe the property is worth $390K – $400K. The only issue I have is the other personal property is worth $40K – $50K and the asking price all up is $410K.
Thanks for you info.
John
Hi John,
Get your broker to run an upfront valuation for you. Its either cheap or free depending on the lender. Also try and order it through the lender that you are looking to get finance with. Again most lenders offer upfront valuations.
Regards
Shahin
TheFinanceShop | Elite Property Finance
http://www.elitepropertyfinance.com
Email Me | Phone MeResidential and Commercial Brokerage
Best to take your tax advise from a tax agent.
There is the market value substitution rule which which means that if you are not paying market value for an asset from a related party then the CGT will be calculated on market value. So the first element of the cost base, for CG, will be the value and not what you paid for it. see s 112-20 ITAA 1997
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
Thanks for the info Terryw.
I plan to speak with my account prior to the purchase,
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