Anything else?
Hi Michael
Transferring the ownership of property and refinancing triggers the following costs:
– property stamp duty on valuation (3.5% to 5% depending on value and State).
– mortgage stamp duty (only if you are increasing the mortgage amount as most State’s only charge on ‘upstamping’)
– mortgage registration and deregistration – $57 each in NSW (therefore $114 per property).
– Most lenders charge a title search fee at around $50 per property.
– There may be a settlement fee (for lender to attend settlement) in the range of $50 – $100.
– Loan discharge fee (to process the discharge of your existing mortgages) normally in the range of $150 to $300 per mortgage.
– Some lenders charge an additional fee for loans in company or trust names and/or to prepare a guarantee (because you’ll probably have to provide a personal guarantee).
– Conveyancing costs (to affect the transfer of ownership).I think that’s about it. Yep, it can be costly.
Cheers
Stu
Property & Finance News
at http://www.prosolution.com.auDon’t forget about CGT.
It may be better to transfer them over 1 at a time in seperate financial years to limit this amount.Hi,
I would like to put an IP that I own into a Trust as well. where did you get the info about the duty if you dont mind?
Are you referring to the fact that if the sole beneficiary of the trust is the existing owner there is not stamp duty?
Hi Michael and Kaye, Kooringal here. You were helpful when I asked you something about transferring a PPR into a trust to ‘lock in’ a capital gain before renting it out…well, I have a better idea. Instead of paying heaps of stamp duty on that plan, I have checked with the tax office and have a better option. WOuld you or any others let me know if you have any feedback on this plan.
When you move out of your PPR, you get a valuation. you can then rent it for however long you want, and when you eventually sell, the cost base is the ‘sale price’ minus the valuation price, not the original sale price…which means you have effectively ‘locked in’ the capital gain that occurred while the house was your PPR without having to sell it, or gift it to a trust (which costs heaps in stamp duty).
Could this suit for your situation?
Cheers, Kooringal.
Hello. We have two properties with mortgages in our own names. When transferring them to our trust, what will be the costs?I expect:
Property stamp duty and transfer fee based on independent valuation;
Mortgage duty and mortgage reistration fee;
Loan application fees, etc;Anything else?
Michael
I really like the bit about the super fund owning my ppor – this should be law (imagine how much money could be liberated for investment!)- but unfortunately this would only apply if the ppor was unencumbered – I’ll have to work on that[
]Hi Michael, how do you transfer your PPOR into a trust FREE OF STAMP DUTY?
We have moved from one PPOR to a new PPOR and we have six months to dispose of the old PPOR capital gains tax free, and there has been a huge capital gain in the old place while it was our PPOR, so without selling it, we wanted to ‘lock that in’ somehow…
So what to do?
First thought, which we have discussed with you before, was to set up a trust, ‘gift’ it to the trust for the current market value, which is 3 times what it was worth when I inherited it 4 years ago, pay the stamp duty, and write off the stamp duty as a big cost now of paying less capital gains tax in the future.
I only recently found out under S 118 – 192 of the tax assessment act 97 if I am moving out of a PPOR for the FIRST time, and if I would be exempt from CGT if I were to sell the house, I can get a valuation, and then rent the house, and when I do sell in the future, the new ‘base’ price will be the valuation, not the original purchase price, so I have effectively locked in the capital gain that occurred while it was my PPOR without having to either SELL, or SET UP A TRUST and pay STAMP DUTY.
Do I understand you correctly that there is a way of transferring the house into a trust WITHOUT PAYING STAMP DUTY? I haven’t read about this and no one has mentioned it to me.
Our old PPOR has been in the family since it was built and it is paid off and our ‘new’ PPOR is almost paid off too – do I understand you correctly that we could set up a trust, transfer this house into it some way without paying stamp duty, then ‘rent’ the house from the trust?
Both the old PPOR and the new PPOR are in my name, and I am presently a low income earner (ie a 40 year old stay at home mum of a 1 and 3 year old and we’re considering a 3rd, my husband is 35 and just scrapes into highest tax bracket), and a estate lawyer/accountant friend of ours has suggested we may not be better off with a trust, as these may be taxed at 30 per cent in the future, and my tax rate will be 0 percent or 17 percent (depending on how much part time work I may do over the next few years) for some time.
We don’t want to sell our old PPOR or our new PPOR any time soon. Of course, plans change, but we see them both as long term investments. They both have excellent prospects for capital growth. We expect to stay in our current PPOR, or move back to our old one, ie stay in this area, for the next 10 years at least, while our children are growing, unless something wierd happens.
Can you tell me any more about how one might transfer a property from my name, into a trust of which I am trustee, without paying stamp duty on the transfer?
And I gather, if the house is my current PPOR, I can then ‘rent’ it back from the trust?
What are the catches? What sort of questions do I ask my accountant?
My ini
Hi Kooringal. As I mentioned earlier, there won’t be any CGT on the PPOR anyway when it’s transferred.When you move out of your PPR, you get a valuation. you can then rent it for however long you want
In our case, the valuation would be needed because the transaction isn’t at arms length, however, we are not moving out.The PPOR is transferred to the trust at valuation cost, no CGT, no transfer stamp duty, and we remain in it paying rent.
when you eventually sell, the cost base is the ‘sale price’ minus the valuation price, not the original sale price
Yes, that’s right. If there is no stamp duty payable on the transfer due to the correct trust structure in place, then it makes sense to have the valuation as high as possible, so future capital gains will be less than if using the original or recent price.or gift it to a trust (which costs heaps in stamp duty).
As I mentioned above, this should not happen to properties under $1M with the correct trust structure.Michael
Be very careful transferring PPOR or IP into Trust whose units are purchased by a SMSF. You could be breaching In-House Assets rules (ie more than 5% of total assets of SMSF purchased/leased from a related party), and be found non-complying. Also possibly breaching Sole Purpose Test of SMSF if you intend to pay rent to the trust whose units are owned by the SMSF. Result could be 47% tax on all income to the SMSF instead of 15%.
(Commercial Property, Shares, Units in widely held trusts ie Asgard, are OK to be purchased from a related party and are not included as In-House Assets)
“An In-House Asset of a superannuation fund acquired after 11 August 1999 is: *an asset of the fund that is a loan to, or an investment in a ‘related party’ of the fund, or *an asset of the fund subject to a lease or lease arrangement between the fund and a related party of the fund.”
“Self managed and small APRA superannuation funds can invest in certain related companies and unit trusts that have no borrowings.
The investment can be made in a related company or trust that owns business real property… The company or trust may also own other assets unless they are specifically excluded by the regulations.
Those company or unit trust investments are not in-house assets where they comply with specified requirements including:
(the point to note here is)
*other than business real property, money and a share in a company:
*it has not acquired an asset from a related party of the superannuation fund after 11 August 1999;
*it does not acquire an asset that had been owned by a related party of the superannuation fund in the previous three years (excluding any period of ownership prior to 11 August 1999);
*it does not directly or indirectly lease assets to a related party;”To paraphrase, if the above occurs, the fund must unwind its investment in the related company or unit trust immediately. This would involve further costs, etc.
The PPOR & IP owned by yourselves are owned by related parties of the members of the superannuation fund and you would be transferring ownership after 11 August 1999.
PPOR’s are not business real property, and it is doubtful whether IP’s would be considered business real property (especially if few in number)
Check with a professional before you continue.
Note: Above text from “DIY Superannuation Manual” Chapter 6 published by Taxpayers Australia (latest update June 2003)
Regards…
Laurie
Kooringal
Was old PPOR purchased on or before 19 September 1985.
If so NO capital gains will apply. Whether you sell it now or later.
However if you transfer it to a trust it will start to attract CGT from the contract date of sale to the Trust.
Regards…
Laurie
Laurie, old PPOR was inherited in Sept 1999, so well after 1985. The big capital gains occurred in Brisbane, as most other places in Aust, over the past couple of years. It was probably worth a bit less than $200,000 then, it is worth about $500,000 now.
We moved to another house 6 months ago to do it up while living in it, and to leave the original PPOR empty to do up too, but now we’ve decided to stay in the new ‘ppor’, we’ve done up the old ‘ppor’ and now we have to either sell it, to benefit from the tax free capital gain, which I don’t want to do, since it is a family home, built by my great grandfather etc, OR set up a trust and move it into that to ‘lock in’ the capital gain, which was the plan until a few days ago, OR…I’ve just found out I can simply get a valuation on the old PPOR, then turn it into a rental property, and when/if I eventually sell, my capital gain is only calculated from the time I get the valuation to when I eventually sell, ie, I ‘lock in’ the tax free capital gain that occurred when it was my PPOR WITHOUT having to sell the property, which I like.
BUT, I like the trust structure too, because if we go into business in a few years, the house would be ‘protected’ to a certain extent, not that we would be planning to fail, of course, but one never knows…
BUT, if I transfer house into trust, there would be about $18,000 Stamp duty applying, which is a lot of money.
When Micheal said there was a way to transfer a PPOR into a trust STAMP DUTY FREE I was interested.
If anyone knows if this is possible, pls reply, or email me at [email protected]
Thanks, Kooringal
KooringalWas old PPOR purchased on or before 19 September 1985.
If so NO capital gains will apply. Whether you sell it now or later.
However if you transfer it to a trust it will start to attract CGT from the contract date of sale to the Trust.
Regards…
Laurie
Kooringal
Something to note.
My understanding is that your PPOR does not have to be house you are living in.
You are only entitled to one PPOR, however.Scenario
PPOR for many years, buy new PPOR and rent old one. Do a valuation of old PPOR just in case 6 months after new PPOR purchased.
You do not have to select which property is PPOR until one is sold. You can rent old PPOR for up to 6 years before returning to it if it is earning income (otherwise indefinitely).
If for some reason you choose to sell the old PPOR within this time period, and it has grown more in value than the property you are living in, it can still be your PPOR and no Capital Gains will apply. However the lesser gain on the house you have lived in during this time is subject to capital gains at a later time when you sell it. However this amount is diluted over time as this house becomes your PPOR from the date of sale of the older property.
If you transfer the older property into a trust this option is then closed to you because a CGT triggerring event has occurred.
I am also fairly confident that a PPOR must be in your own name, ie a trust cannot have a PPOR unless it is a ‘bare trust’ and the beneficiary occupies the property (TD 58) or deceased estate.
However, ensure you check with a professional
Regards…
Laurie
Laurie, my other problem is…I think I have been trying to be toooo clever…when I bought the investment property, we decided to move into it, to pay less stamp duty, for a year, ie one pays less stamp duty in qld if the home is to be owner occupied as opposed to investment…so…we left our PPOR, to move to the new house for a year, to satisfy stamp duty requirements…leaving the old PPOR ’empty’ ish so we could do it up while we were living over here, and we actually have a friend in it who is paying us some board as well, so that is handy too, cash, we get to leave our junk there and do it up at our leisure, and we get a bit of board from johnno as well…BUT…we’ve now decided we don’t want to go back to our old PPOR – the ‘investment’ property we bought actually suits us better, bigger, big garage etc…so now I’ve got to do something proactive with the old PPOR, ie get rid of our stuff, get rid of Johnno, and rent it officially.
My understanding is that I can rent my PPOR out for up to 6 years and still sell it capital gains tax free ONLY IF I AM NOT MAINTAINING ANY OTHER PPOR – and since I am claiming the house we are living in now as a PPOR for stamp duty purposes, I don’t think I can keep the old ppor as my official ppor for cgt purposes…??? if stamp duty talks to the tax office…i come undone.
Also, it is unlikely I will want to either sell the old ppor or move back into it over the next 6 years, so I am better off switching the old PPOR into an ‘investment’ property now, or selling it to a trust now – you have six months when moving from one PPOR to a new PPOR to sell the old PPOR CGT free – so I ‘gift’ it to a trust now, or I get the valuation and rent it from now and my capital gain is protected anyway, which is all I want, that the capital gain that occurred while it was my PPOR is protected.
The house we are now living in will also have a big capital gain, so we will not lose out. It has already appreciated probably $100,000 in the past year, we bought just in time in this suburb.
Thanks for your feedback, laurie
quote]
KooringalSomething to note.
My understanding is that your PPOR does not have to be house you are living in.
You are only entitled to one PPOR, however.Scenario
PPOR for many years, buy new PPOR and rent old one. Do a valuation of old PPOR just in case 6 months after new PPOR purchased.
You do not have to select which property is PPOR until one is sold. You can rent old PPOR for up to 6 years before returning to it if it is earning income (otherwise indefinitely).
If for some reason you choose to sell the old PPOR within this time period, and it has grown more in value than the property you are living in, it can still be your PPOR and no Capital Gains will apply. However the lesser gain on the house you have lived in during this time is subject to capital gains at a later time when you sell it. However this amount is diluted over time as this house becomes your PPOR from the date of sale of the older property.
If you transfer the older property into a trust this option is then closed to you because a CGT triggerring event has occurred.
I am also fairly confident that a PPOR must be in your own name, ie a trust cannot have a PPOR unless it is a ‘bare trust’ and the beneficiary occupies the property (TD 58) or deceased estate.
However, ensure you check with a professional
Regards…
Laurie
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