G'day all,
I am new to this game and have a few questions for the educated.
The misses and i recently (last year) purchased a property in only her name as this purchase would then be eligible for the FHOG (due to definition of defacto spouse as per Acts Interp Act)
I was the guarantor for the loan and remained off the title. We have now met our requirements of the FHOG and wish to transfer the title into both our names for taxation purposes (now meet definition of defacto spouse.)
We are able to add my name to the loan product without fees and wish to take advantage of a spousal transfer exemption outlined in s151 Duties Act.
After reading the section I am wondering what is defined as "will be the principal residence of the parties?" Can this "will", be an unspecified distant future date or will we need to occupy the house immediately? Any thoughts on the matter?
Further to the question, if my name is now on the title and loan, can I now claim the borrowing costs over the first 5 years? Or do I miss out as I was not on the loan/title at the time of the borrowings?
Any thoughts or ideas would be great. Am I completely off the track? Would anyone else do it differently? The house is in QLD and my income is apx 80 000 with the misses being 30 000.
Cheers
151 Exemption—particular residencesTransfer duty is not imposed on a dutiable transaction that isthe transfer, or agreement for the transfer, by way of gift, from1 party to a subsisting marriage or de facto relationship to theother party to the marriage or de facto relationship, of aninterest in residential land if—(a) after the transfer, the residential land will be owned bythe parties as joint tenants or tenants in common inequal shares; and(b) the residence will be the principal residence of theparties.
fishngym,
I am not quite sure about the lead up.
When the place was purchased originally, you or your defacto must have lived in for 6 or 12 months to get FHOG.
So do you live in it now or is it rented out?If you now rent it – then I would assume you have 6 years grace before it is not CGT exempt, unless you move back into it for a while.
But do you have a house of your own?
Thanks for the reply mate.
We already had a PPOR and met the requirements of the owner occupied FHOG.
This FHOG house is now being rented.This property is heavily negatively geared and the misses' income does not allow us to maximise the tax benefits. The house is a long term hold and we want to take adavantage of yearly tax benefits.
My limited knowledge indicates that I will not have the yearly tax benefits unless I am added to the title. Is this correct? Does anyone, without a trust, claim expenses when the property is only in their partner's name? I will now be on the loan, and have always contributed to the repayments.
Cheers
If the property is in the name of your partner, no, you won't be able to claim the rental expenses, even if you make repayments. For tax law purposes, the repayments will either be taken as a gift from you to your partner or a loan.
To ensure that you can claim the rental expenses, including interest, you need to draw down a loan to buy the rental property from your partner. The law takes a very lateral and direct view and traces where the borrowed funds are applied to determine the tax deductibility of the interest.
For instance, if you have previously drew down a loan to make repayments on the property held by your partner, the interest on your loan would not have been tax-deductible. Even if you change the title of the property to your name and use the previously borrowed funds to pay off your partner's mortgage, there will be issues regarding the deductibility of the interest because the borrowed funds are arguably used to extinguish your partner's loan, which is private and non-deductible.
You need to be quite careful in structuring the title change to safeguard the interest deductibility because the tax law often takes a form over substance approach.
Eddie
[email protected]How can you claim borrowing costs for a PPOR or place that was purchased as such?
are you saying you already had a PPOR in your name, and purchased one in your partners name as a 'PPOR" with the intention of making it an investment property?
So that's where my taxes are going……….If it is all legit, re-read Eddie C's comments, as you would need to 'be careful'.
Thanks for the reply guys.
Eddie, would it make any difference that the misses' loan (I'm currently guarantor) is now being changed to both our names on the mortgage via refinancing? Followed by the addition of my name on the title?
It sounds like perhaps I've complicated things beyond my level of knowledge.
Are there any sections of the ITA Act that are aplicable to my circumstances? If so, I'll have a read.G'day V8ghia, it is all a matter of definitions. We were eligible for the FHOG due to the length of duration and classification of our relationship. The FHOG Act has a specific definition of spousal relationships. We then had to occupy the residence to be eligible for FHOG. I think that taxes are paid by the dumb and the poor, hence I am on here trying to climb out of those categories.
Cheers
fishngym wrote:Thanks for the reply guys.
Eddie, would it make any difference that the misses' loan (I'm currently guarantor) is now being changed to both our names on the mortgage via refinancing? Followed by the addition of my name on the title?
It sounds like perhaps I've complicated things beyond my level of knowledge.
Are there any sections of the ITA Act that are aplicable to my circumstances? If so, I'll have a read.G'day V8ghia, it is all a matter of definitions. We were eligible for the FHOG due to the length of duration and classification of our relationship. The FHOG Act has a specific definition of spousal relationships. We then had to occupy the residence to be eligible for FHOG. I think that taxes are paid by the dumb and the poor, hence I am on here trying to climb out of those categories.
Cheers
The issue with "refinancing" is that the financier usually advances a separate new loan to pay out the old loan that was previously in your spouse's name. The deductibility of the interest on the new loan will depend on how the funds from the new loan is directly applied. In my view, if the funds are used to retire a debt on a rental property, the interest on the new loan will likely remain tax-deductible. However, if the funds are used to retire a debt on a private home, the interest will not be tax-deductible. If the property was a rental property but will become a private home, again, the interest will not be deductible as the loan will be supporting a property that does not produce assessable income in future.
The relevant section in the ITAA 1997 is section 8-1 but you might find TR 2004/4 more helpful in explaining how this section applies:
http://law.ato.gov.au/atolaw/view.htm?rank=find&criteria=AND~2004%2F4~basic~exact&target=EA&style=html&sdocid=TXR/TR20044/NAT/ATO/00001&recStart=1&PiT=99991231235958&recnum=4&tot=29&pn=RDB:::RDBOf particular interest will be the bit about refinancing. Hope the above helps!
Eddie
[email protected]Thanks Eddie.
I'm doing some big days at the moment. Hopefully I'll get into it tomorrow and read the sections.
Thanks for putting in the extra effort mate.fishngym wrote:Thanks Eddie.
I'm doing some big days at the moment. Hopefully I'll get into it tomorrow and read the sections.
Thanks for putting in the extra effort mate.No worries. I'm probably one of the very few people in this world who think tax is fun!
I have just joined this site and have a similar question, but for the opposite result,
My husband (of 25 years) and I jointly own our property and he would like to transfer the home into my name only
Do we need to pay stamp duty etc on this in NSW?frances52
Is this house your PPOR ? or an IP?
I would say yes, you will need to pay stamp duty on half the value, you may need to get a valuation done so you have a figure for tax purposes in the future, are you to then make it a IP?frances52 wrote:I have just joined this site and have a similar question, but for the opposite result,
My husband (of 25 years) and I jointly own our property and he would like to transfer the home into my name only
Do we need to pay stamp duty etc on this in NSW?Hi Frances
Have a look at the relevant NSW legislation, The Duties Act (1997), s67 and in particular subsection (1)(c)
http://www.austlii.edu.au/au/legis/nsw/consol_act/da199793/s67.htmlYou may be able to do it in NSW if the property is owner occupied etc.
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
Thanks for your advice- yes it is our principal place of residence- I will look up the sites you suggested
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