You are right, but this is still worthwhile because:

– The property has only recently became an investment property, so CGT would be marginal if any.
– We would have to pay only half of the stamp duty, because only 50% of the property is being sold.
– The bank shouldn't be an issue as well, because the bank already knows how much the property is worth (there is a loan on the property already). Due to the nature of the transaction the property will also be valued by the state, and the bank should definitely be OK with that.

Save on tax is only an added benefit, the main purpose of this exercise is to claim the funds previously paid for in the mortgage. The question is how much are we going to be left with eventually, because the calculation is not that straightforward.