Dear Fellow Members,
I've got an IP which is owned 50/50 between my wife and myself. She stopped work as we had a child, so now I want to change the ownership percentages to be 90/10%. My solicitor says he can do the paperwork and there wont be any stamp duty as its' only a percentage change. I now need to find out if the bank agrees to this.
Assuming I sell this property in another 2 years time, how will I calculate CGT? i.e. the 1st year the ownership is 50/50 and Year 2 and Year 3 it was 90/10. So is CGT based on 90/10 OR some complex formula?Appreciate any advice..
Thanks
DanHi Daniel,
Whilst ‘prima facie’ it appears to be just a ‘percentage change’ – from a tax perspective your selling the property to yourselves. So whilst some states will give you a concession on stamp duty, the transfer is still a capital gains tax event.
Because no cash will change hands the cgt up to the day the property is transferred cgt would be calculated based on the market value of the property on the day of transfer. That would be payable in the tax return for the year in which the property is transferred.
Later, when you sell the property the market value used in the above calculation would be the ‘cost base’ for cgt rather than the original purchase value.
Is the property positive geared? If it’s negative geared and your transferring the 90% to your name to claim the loss against your salary, then it will catch up with you because you’ll pay the majority of cgt when you sell.
Hi Mr501,
Thanks for the reply. Could you kindly elaborate a bit more. My situation is:(1) The property was bought in 2010 Sep for $374,000
(2) The current value is perhaps less (maybe $ 360,000).
(3) The property is now negatively geared…(3) assume I do the transfer now (say 1 June). I'm making a Capital loss. So do I still need to pay anything??
(4) Whom do I need to consult to make sure there is NO stamp duty? I'm in VIC.
Thanks
DanWell..
If it was transferred on 1 June @ a market value of $360k, then you would incur a capital loss of $14k ($7k each) which isn’t deductible against your other income, only against any other (or future) capital gains.
So then if you sold in 2 years for $400k. There’d be a capital gain of $40k, ($36k for one of you, and $4k for the other) So whoever has the 90% share works out their capital gain as (36 – 7) / 2 = 14.5k – taxed at marginal rates. Whoever has the 10% share ends up with a $3k capital loss (4 – 7) sitting in their tax return until they have another cgt event.
If it’s negatively geared then I guess your looking at putting the 90% in your name to claim as much of the deduction as you can. Thing is – if it’s only going to be for a few years, then how does the advantage your getting compare to the disadvantage of having to declare most of the capital gain in your name – in the higher tax bracket?
Re: confirmation about stamp duty. I’m not sure in VIC but in WA i’d ring the office of state revenue. Stamp duty is a state tax. They’ll give you a solid answer.
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