ATO considerations with property investment

Hi,

My partner & I both own an investment property each and want to purchase a PPOR to live in.

After talking to a financial advisor, we found out that we can sell our investment properties to each other (without having to pay stamp duty as we are in a relationship) in order to access funds with which to purchase our PPOR outright (no mortgage) and the money we borrow from the bank is used to purchase the each other’s property as an investment, therefore making our loans tax deductible.

So we would each be taking out a new loan to fund the purchase of the others investment property.

As part of the process of setting up the loans, the bank has got valuations on our investment properties. It turns out that their valuations are short of our own estimates, not massively but say (5-20%).

As we are planning to sell at agreed price, what implication could it have from a legal perspective if we proceed to sell at the prices we originally planned prior to the banks evaluation.

For example could the ATO penalise us if we sell the investment properties to each other above the bank valuation figure as potentially we could be evading tax by getting a bigger tax break than if we had sold them at the banks valuation rate?

If we were audited, what type of evidence would we have to provide to the ATO to justify the prices we bough/sold these properties to each other at?

For example if they became aware that a bank valuation service put the value of the properties as less than what we bought/sold at, would we be in trouble.

Alternatively, if we got an evaluation from a real  estate agent (who are typically less conservative than a bank) would that be acceptable justification for the agreed value we used?

Hopefully my explanation makes sense.

Any advice is appreciated.

Thanks