Co-ownership

You will need a conveyancer or solicitor to help with the transfer too.

Maybe you could think about buying him out?

Well one partner is just buying out the second. So it will be just the same as buying a another property – you need to apply for the loan, bank assesses the applicant, does the valuation, gives the approval and then the solicitor changes the title. The only difference is negotiations between buyer and seller should be easier.

You would have to pay bank fees and some govt charges like discharge of mortgages etc. Banks may waive their fees if you are staying so this is worth negotiating.

Stamp duty will depend on the State that the property is located in. Generally stamp duty will apply unless it is the main residence – except, i think in Vic, where spouses can transfer investment properties between themselves without stamp duty. No such thing as compassionate discounts I am afraid.

Who would be obliged to pay the stamp duty here? I'm in a situation with my bro at the moment where we've owned a house for about 4 years now and he wants to sell. House and loan in our name, and we also go the FHOG too. I want to keep the property so we are looking into me buying him out. A few questions:

– who would be responsible for paying stamp duty (if applicable)? I think he should because I'm not the one who wants to sell the house.
– is there any complications with the FHOG being involved?
– what is the best way to transfer house in to my name and pay out my brother?

Purchase price – $300k
Mortgage owing – $275k
Market value – $420k

Cheers,
Ryan

My own experience in similiar situations backs up what Terryw instructs here.

You wouldn't pay CGT, she would as she is the one selling. You would just need to pay stamp duty and loan fees.

There is no spousal deals between sisters I am afraid.

Terry, would you have to pay stamp duty on the value of the house, or half of that as that is effectively the share of the house as you already own the other half.

I'm trying to crunch the numbers on my situation.. can someone please help me with this.

Property value (estimated): $440K
Loan: $275K
Equity: $440K – $275K = $165K

So I would need to refinance and pay out my brother $82.5K for his share of the house.

Payout: $82.5K
Stamp duty: $20K
New loan amount: $377.5K

So I would need to refinance the loan in the amount of $377.5K but this would leave me with LVR of 85.7% so I would have to pay LMI.

– Is all interest from the new loan tax deductible, including the extra amount borrowed for stamp duty?
– Do I have to pay stamp duty on 100% of the value, or just the 50% that I am buying off him?
– Is mortgage insurance avoidable in this situation? Potentially I could refinance to 80% and pay him the rest separately? Can you see any pitfalls in doing this?

It is becoming a really tough decision for me to make as going through with this is going to leave me in a very negative cash flow position (currently rented at $320/week) and will slow down my plans for future capital growth, plus the fact that I have to pay double stamp duty on the property which is ridiculous! I really think I should be hitting my brother up for stamp duty as I'm not the one who wants out of the investment.

The other option is we take the house to market and sell and whatever profit is made I can reinvest that in another IP that might show better cash flow for me. My accountant has told me that since it was once our PPOR (around 3 years ago), and neither of us have had our name on another title we would be exempt for any Capital Gains Tax. Is this correct?

Also, is this worthwhile going through these scenarios with an accountant. The bottom line for me is I don't want to be getting myself in a situation with significant negative cash flow that is going to impede further investment, but at the same time I can still see some really good capital growth in this investment.

Help is appreciated!!!!!

Thanks,
Ryan

For the calcs, it is up to you guys on how to split it, but you could probably assume it is being sold to a third party to make things easier to calculate or get your head around.

Just divide everything in half.

Sell for $440,000, pay back loan of $275,000 = $165,000 cash released = $82,500 each

so you would give him $82,000 – but that is not including costs such as legals and loan fees. Should he compensate you for these or half because he wants out???

If you have to increase the loan to pay him out you may be required to pay LMI too. Should he pay some of this??

If the place is being used as an investment then the interest would be generally deductible.  THis would include the interest on money borrowed to pay LMI and stamp duty too. LMI may be claimable over 5 years.,

You could be exempt from CGT under the absence from main residence rule, s 118-145 ITAA 1997.

Well, you are only really transferring half the house so stamp duty on $220,000 which is the value of the portion transferred.