Hi,
What I would like to take all the equity out of our exsisiting home (fully paid off) and literally purchase it from my wife. The home is currently in her name, we are not splitting or anything, just want to turn our house into an IP.We then want to take that money and put it towards our dream house therfore all our debt will be “good Debt”.Interesetd in the leagallities here as well as Stamps payable etc. Appreciate any comments….Showbags,
This will be a costly exercise, and quite frankly I don’t see the point.
You will be liable for stamp duty.
If you want to turn it into an IP that’s fine, why not just move out and rent it??? As your PPOR it is CGT exempt, and provided you do not buy another PPOR in the time that it is being rented, you can sell it within 6 years of it generating income without having to pay CGT.
Okay so the house is in HER name SOLELY??? Fine, let’s run with it…..you buy her out, pay the stamp duty, then what??? Borrow to buy YOUR (as in both of you) dream home??? Will you be buying it in JOINT names, if so, should you ever sell the old place only one of you will be CGT exempt. And what of the money to buy her out, will you be borrowing it in your name alone??? When you go to buy your new place together, the loan will need to be in joint names if it is to be jointly owned. You need to clarify some finer details before anyone can advise you adequately. This sounds very messy to me, and almost smells of tax evasion!!!
I am not sure I understand the motive behind this activity; on the surface it doesn’t look like the most financially viable option.
Cheers,
Jo
Jo,
The purpose of the exercise is to simply transfer deductible interest payments to the IP where it is more effective.
And thence the non decutible interest payments will be against the new PPOR.
It is a costly exercise and I would counsel you to run your figures to see if it is cost effective.
Cheers,
Simon Macks
Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Thanks Simon,
My apologies showbags, I had overlooked a very important point, to which Simon has so kindly drawn me too, and that is the transfer of “bad debt” to “good debt” or non-deductible to deductible.
Cheers,
Jo
Hi showbags,
Have you owned a property in your name before or just your wife. Just wondering in doing this if you would qualify for the first home owners grant and free stamp duty.I just refinanced my home through ANZ and upfront I’m only looking at $1300 – $1700 in bank charges.
There was no setup fee but I do pay $295 per year. This includes a $95 a year gold card and bank account with no charges regardless of how many transactions I make etc from their atm’s, and a cheque book.However I had to refinance to buy more property as I am financially poor. If you are not in this situation you may be better off selling your house, which will give you a deposit for your new dream home plus every $10 000 left over can be a deposit for another +ve cash flow IP.
Personally I would do what Steve says and divide and multiply, that is sell your house and use it to fund more property which equals more income
easymoney
Hi Simon,
You mention it will be a costly exercise, how so may I ask? As I understand it, there is no duties between property trasactions between spouse’s. All I thought I would need to do is transfer the title, extract the equity and borrow in my name the full amount. Then, I thought all expenses would be a deduction.
Easymoney,
It is not my first home so the first owners grant will not apply, thanks for the idea though. The divide and multiply is great but we (particually my wife) want our dream home first.
Originally posted by showbags:Hi Simon,
You mention it will be a costly exercise, how so may I ask? As I understand it, there is no duties between property trasactions between spouse’s. All I thought I would need to do is transfer the title, extract the equity and borrow in my name the full amount. Then, I thought all expenses would be a deduction.
Sorry showbags,
That is an old rule, there is no more free transfer between spouses as there once was, it was phased out last year (not sure of exact date). Although I don’t know if this was nationally the case, but I know in Victoria, the transfer between spouses was no longer a simple matter.
Cheers,
Jo
Jo,
Really, that rule is no longer…… I am suprised, there goes that plan then. There is little use if we have to incurr that nasty duty!!!
Are you sure?,Showbags,
I am sooooo glad you asked that question.[biggrin]
Just got off the phone to the Victorian SRO and I have been informed that transfers by “natural love and affection” are still permissable and do not incur costs here in Victoria; not sure about other states though.
It took me a minute because I was trying to remember the exact conveyancing term for it, and then fumbling through some documents I came across it, and rang up. Am thrilled to bits that I did too!!!
Here is a glossary definition of “natural love and affection”
In conveyancing terms, the term is generally used to refer to the reason or explanation for the transfer of land. Typically, it is an amount of money paid by the Transferee to the Transferor, but it may refer to some less tangible factor, such as the natural love and affection the Transferor bears towards the Transferee.
Also of interest to you may be:
http://www.rbt.treasury.gov.au/publications/paper4/part3/section6.htm#Heading37
I believe that it is still permissable HOWEVER it is done shortly following the sale of the property, it will raise a red flag with the ATO who may see it as a tax evasion exercise, so please be careful!!!
Good luck (and thank you) [biggrin]
Jo
Showbags,
Not sure which state you are in, however for Vic, just had a quick look at the legislation and from my search I believe transfer of property between spouses is exempt from duty.
S43 (3) of the Duties Act 2000 actually states exemption of duty when transferring between spouses.
Plan back on?
Jo,
Thanks for following up on that, I did exactly the same thing yesterday and was told we could achieve this without any duty. I really appreciate your input.
Woodsman,
thanks also for your help and YES, the plan is back on. I fiqure the price of our house will double in 7-8 years, holding costs will be marginal (taking into account tax deductions) so as I know the house, it’s solid and sound, I can’t see where we can go wrong.I think there is stamp duty exemption still in NSW when transferring between spouses.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]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
Showbags, This sounds like a good idea to me. Just do some sums and talk to your solicitor about it.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]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
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