Hi all
Hope you don't mind me asking these questions.
I know I need professional advice but thought I ask here and get some back ground info.I have been in a defacto relationship for 1 year and are currently renting together. We both earn the same money.
When we got together we both rented out our own homes and moved into a rental.Can I sell my house to my defacto so she can negative gear it?
Can I buy her house so I can negative gear that one?
how does stamp duty go with this?
How much Capital gains after only 1 year of rental? Both these houses were our live in homes before we met.Both our houses have been rented for 1 year now. Not negative because existing loans not the maximum on these properties.
We are trying to maximize & realize the equity in our houses at the same maximize our tax advantage through negative. gearing.
Then we want to use that money to buy our own home.cheers Phil…..
Snoop,
From a purely unprofessional opinion, it sounds like a complicated way of doing things.
What state you are in is going to be a big factor, as you may get absolutely murdered with stamp duty when exchanging the properties with each other, but at the end of the day you can still do it, as the properties seem to be in your individual names (thus only one of you on the title).
In regards to using the money from your existing propertys equity, it doesn't matter who the house belongs to as far as maximising tax deductions. The only thing that matters is the purpose for which the money was borrowed, i.e. to produce an income or not. If you're going to use the equity in your home, and hers, to purchase a PPOR then that portion of your loan is not deductible.
The Capital Gains question is a bit like asking how long is a piece of string?
A little more information is needed, however, if the property has only been used as an income producing asset for 1 year, and it has realised a capital gain over the time you have owned it, the gain will be apportioned and you will only be taxed on the 1 year portion of it.I hope that helps somewhat, but I'm sure there'll be plenty of other helpful hints.
Matt
Thanks for the response Matt
Just to clarify a few points.
I owe very little on my house that i rent out currently as it was my Former home.
If i borrow against this and buy a place to life in it won't be tax deductible as you say.
she is also in the same position.But what if?
I sell this house to my defacto spouse, she borrows 95% purchase price. She can then negative gear this property and maximize tax deductions. She would then sell her house to me the same way I would get LVR 95% also.
We then have money in the bank to buy a home to live in.cheers Phil….
You could move into the house you owe very little on and use the equity via a line of credit loan for the deposit on another investment property that you could negatively gear.
If you move into the almost owned house you get capital gains exemption from the time you move in.
time lived in it
time rented
time moved back in
sale point
Capital gains tax = time rented / total time owned * capital gain achieved
if rented it for more than 12 months you get 50% cgt discounthttp://www.ato.gov.au/individuals/content.asp?doc=/content/36883.htm
seeMain residence for only part of the time you owned it
If a CGT event happens to a dwelling you acquired on or after 20 September 1985, and that dwelling was not your main residence for the whole time you owned it, you get only a part exemption.
Hi All
We don' have any cash, I don't want to live in her house and she doesn't want to live in mine, that's why we rent at the moment.
We want to start our live together a fresh. It doesn't make sense to borrow money for a PPOR when we have equity in our previous PPOR's. that are now rented. What we want to do is restructure our assets so that our PPOR will be debt free and our investments properties are geared.
cheers Phil.I haven't read the other replies…… but there are a few things to consider. Firstly the ATO could possible apply part IVA of the tax act to deny deductibility as it seems to be a scheme with the dominant purpose to save tax.
There is also the fact that since you are defacto you will only be allowed one main residence with CGT exemption between you both. Both could possibly be exempt from CGT up to the point you moved in together.
Stamp duty will depend on which state you are in, but generally is only exempt for transfers from one spouse to both and only for the main residence.
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
A little more information is needed, however, if the property has only been used as an income producing asset for 1 year, and it has realised a capital gain over the time you have owned it, the gain will be apportioned and you will only be taxed on the 1 year portion of it.
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