Hi,
Can anyone tell me if this is possible or their idea's for a better solution?
A direct family member transfers their property into my name (no cash changes hands). I knock it down (it's an old house) and rebuild it into a new house.
As this is their primary place of residence i assume they pay no capital gains tax, but I would pay stamp duty? Anything else I would have to pay?
After building the new house I rent it back to them at say 50% below the market price for the next 20 years. I claim the stamp duty, mortgage interest payments etc as income tax deductions.
Is this legal? I don't want to do anything dodgy, but I am trying to work out some way of helping provide a nice liveable home for the family while also making the most of the tax benefits to help me pay off the mortgage I've rung up.
Your thoughts appreciated,
CrystalQ wrote:A direct family member transfers their property into my name (no cash changes hands). I knock it down (it's an old house) and rebuild it into a new house. As this is their primary place of residence i assume they pay no capital gains tax, but I would pay stamp duty?Yes you have to pay stamp duty as though the transaction happened at market value.
CrystalQ wrote:Anything else I would have to pay?Some minor incidentals like title registration etc & you'd want to do the legals correctly – you don't want a land tax bill or back rates charges. I assume that there is no mortgage presently owing?
CrystalQ wrote:After building the new house I rent it back to them at say 50% below the market price for the next 20 years. I claim the stamp duty, mortgage interest payments etc as income tax deductions.There is some doubt that you are entitled to a tax deduction for expenses if you do not charge market rates for the rental.
CrystalQ wrote:Is this legal?Yes
CrystalQ wrote:I don't want to do anything dodgy, but I am trying to work out some way of helping provide a nice liveable home for the family while also making the most of the tax benefits to help me pay off the mortgage I've rung up.So they are gifting you the old house & land. You knock down the house & build a new one with a mortgage. And then you want to repay the favour and give them reduced rental?
It might be better to charge market rent and to "buy" the land off them in the first place. But do it as vendor finance and pay the vendor finance back from the rent they give you. Effectively achieves the same outcome only better for tax.Your relative will need to consider impact on Centrelink benefits if they are claiming these now or in the future
Hi,
Actually I thought I would qualify for the first home owners grant which would mean i am exempt from paying stamp duty? But I am not 100% confident OSR gave me the right information when they said I would qualify so long as I had a contract to build the house. Nobody (not my accountant nor the construction company nor my solicitor nor OSR, nor my finance broker could answer with 100% certainty I would get the FHOG in this situation). I am so confused about the whole issue.
Basically they are "gifting" me the land because it will help me secure a bank loan I might otherwise not get and not be able to build them this house. Otherwise, I think that as per the OSR site (
http://www.osr.nsw.gov.au/lib/doc/rulings/rrfhog1.pdf
) they don't actually need to transfer the land across to me for me to get the FHOG.
As for centrelink benefits, they already don't seem to qualify and everytime you ask Centrelink about the rules and impacts you get a different answer.
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One condition of the FHBG is that you actually live in the premises for 6 months within the first 12 months of ownership (although if it is being built it may be difficult). Also, if the house is being knocked down then it may be better to buy it with a contract for construction already in place to recieve the increased grant for a new home. If on the other hand it is an investment property, you will not get the FHBG but you would still qualify for it on another house (provided that you don't live in this one).
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