Hi, Can anyone tell me the legalities of transfering our investment property from myself and the wives name to myself. Was told if we do that and realign the two loans we have (investment loan and PPOR loan) a better tax return we will get off the investment property. Was told to max out the equity in the investment property by one partner (myself) buying out the other partner (wife) and by doing this both properties will be leveraged to 80%. Is this legal. I hope this makes sense.
you will need to do a transfer of title. Some states have stamp duty exemption between spouses – but usually only for main residences. You will need to speak to a lawyer to do the conveyance and work out if you are stamp duty exempt.
You will also need to reapply for loans again.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
Tax is like swings and roundabouts; what you get in one area, they take back in another. I would say you would be up for stamp duty on the transfer of the investment property title, and your wife could be up for capital gains tax on her share of the investment property.
Another way you could do it is get divorced, as CGT on property settlements in a family breakup is generally deferred until the asset is sold. (But this is a pretty drastic step to save some tax!)
DWG
Yes perfectly legal and a strategy we put place for client all of the time.
Especially works well if the property had been your PPOR at one stage in the last 6 years as their is no GST liability.
Sure there is some Stamp Duty to pay and this needs to be weighed up but depending on the difference in marginal tax rates and the actual size of the loan it can be well well worth it.
Richard Taylor | Australia's leading private lender
There can be CGT liability even if the investment property was a previous PPOR, if they are currently claiming the main residence exemption for another property. The six year rule is only valid if there is no other property where main residence exemption is being claimed.
Hi,and thanks to all who posted a reply. I still don't understand fully. Yes our investment property was our ppor until a month ago. What happened was we drew some equity on it to use for renovations. Then my wife found a house she loved,put an offer on it and the offer was accepted. Now we used the remaining money (from the equity) and a loan to buy our new home. Then was informed that this new loan now for our old ppor was not fully tax deductible. Only what was remaining on the loan before we combined our equity money was. Yet it seems the tax people wont mind if we change the title to a single name,realign the loans to 80% lvr which increases the old ppor by 60k and put that money on our new house to decrease the loan by 60k to make our investment property more taxable. I cant see the difference between the two scenarios or is that just the magic of property investing. Cheers DWG.
DWG
Changing names on the title means a sale. Your partner is buying your share. Think of it as 50% share each. You are keeping your 50% and buying another 50%. Your original loan will be 50% deductible up to the redraw point. The remaining 50% is being purchased using a new loan and since this is an investment then all of this new loan (to buy the 50%) should be deductible.
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
At this point there should be no CGT to pay on the sale of 50% of what used to be your PPOR, however stamp duty probably is. How much is that in the state you live in.
Also, as Dan42 pointed out what you gain now you may pay for later.
In other words, putting the house into your name now so as to get more tax deductible debt will mean that, should you sell the property at some stage, all the capital gain will be added to your taxable income rather than split between the two of you.This is not a problem if you believe that you will never sell or that there will be no capital gain between now and then or that you and your wife are both on the highest taxable income group or at least will be at the time you sell.
Something more to add to the calculation.
Elka
Thanks Guys For the advice. Just one more question. If i leverage the remaining equity in the investment property ie $60k. Can i put this straight on the PPOR mortgage and still claim the full tax deduction on the investment property. DWG.
DWG
YES thats one of the reasons you would do it.
Richard Taylor | Australia's leading private lender
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