Looking at changing title on an IP from my name to tenants in common with my wife,propably 99/1 me and her.
Is there CGT on this transfer? and how is it calculated. I searched this forum and looked at ATO CGT guide but nothing seems to answer this.
Some example nunbers to help
Purchased in 2001 for $100k
Costs $5k
Market value now $200k
Transfer 1% to wife.Can anyone help ?
The transfer of an interest in real estate does result in a change of beneficial ownership. In this situation, you have gone from owning a 100% interest in Property A to owning a 99% interest in that same property. This results in a disposal of 1% of your interest in Property A. The disposal of an asset is a capital gains tax event A1 (section 104-10 of the ITAA 1997).
Capital proceeds is consideration you received upon the disposal of your 1% interest in Property A. There are modifications to this general rule where you do not receive any consideration. Under this modification, you are taken to have disposed of your interest in Property A at market value on the date of disposal (section 116-30 of the ITAA 1997).
The cost base is made up of five elements. Generally, the cost base is the amount you paid to acquire the relevant assets plus any expenses you incurred in acquiring and disposing the asset. As you are only disposing of a 1% interest, only 1% of the acquisition cost and incidental cost of acquisition form part of the cost base. Please refer to page 5 of the Guide to capital gains tax 2003-04 for further information on your cost base.
You will also be eligible for other capital gains tax concessions if Property A has been held for longer than 12 months. Please refer to page 14 of the Guide to capital gains tax 2003-04 for further information.
You will need to see your accountant to provide further information and for them to calculate your CGT liability.
Maniyak,
Why bother??? [blink]
If you are only basically cutting your wife into the picture by a measley 1% you may be creating more problems for yourself than you need to further down the track; not to mention the costs associated with this transaction (especially now that transferral of title from spouses is no longer exempt of Stamp Duty fees).
If you are doing it for the sake of asset protection in a property settlement in the event of a relationship break up, you will probably be shocked to learn the it won’t make much difference in the divisiion of same (which is normally done on a 50/50 split, all things considered equal of course).
I personally wouldn’t do it, but then ultimately the choice is yours.
Cheers,
Jo
Thanks Coasty, very detailed and informative reply.
I didn’t say why, just asked the question re CGT. I hope others ready got a little out the information provided.
Sorry Maniyak,
I didn’t mean any disrespect.[blush2] I wasn’t meaning to pry. I only questioned you because, although it can be very worthwhile exercise depending on your long term goals, this can work against you (for various reasons). I guess I am like the myriad of investors who will tell you that one of the golden rules is “never buy in joint names” But hey, I didn’t mean to tell you your business.
Cheers,
Jo
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