Adding to title - Stamp Duty?

Discussion in 'Loans & Mortgage Brokers' started by mrblack, 15th May, 2020.

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  1. mrblack

    mrblack Member

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    Hey everyone. Sporadic long time reader, new member, 1st post, so please be kind if this is not the right area :)

    So here is the situation:

    Me and my wife bought a property a few years ago for $1M. Took out a loan for 750k on it.

    Now, I would like to add my child and their spouse to the title, and also the mortgage (still 750k) and they will be paying the bank for that mortgage.

    Question is, what is the Stamp Duty that is payable by the kids we are adding?
    Is it based on the share that they are acquiring? e.g
    Property value = $1M / 4 people = Stamp duty payable on $500K for the 2 new people on title?
    We wouldn't have to pay stamp duty again on our remaining share?

    We are in Victoria if that helps.
     
  2. Trainee

    Trainee Well-Known Member

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    Have you considered other issues. Capital gains tax? Divorce? Deductions? Death? Your child and their spouse’s first home buyer concessions etc? Will they live in it? Rent? Are they paying you for the half share?

    why are you doing this?
     
  3. Scott No Mates

    Scott No Mates Well-Known Member

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    Assessed at market value not at your purchase price.

    Have you considered separate legal advice (different parties/with different issues) & conflicts of interest for one solicitor acting for all parties.
     
  4. mrblack

    mrblack Member

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    Thanks for all the great questions, and yes we have considered most of these.

    The main reason for doing this is to give an asset to them in their name. They went through a rough patch and we helped by buying the house which they are living in currently, but now they can afford to make the mortgage repayment on the 750k loan, we thought we should add their names in on the title and the mortgage.

    Let me clear, we will remain on the title, we are just adding another 2 people at equal share.
     
  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    amount transferred = $5000,000. you are only transferring 50%

    It is probably best not to do this.
     
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  6. mrblack

    mrblack Member

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    Why?
     
  7. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    many reasons not to do it
    - lose of one main residence exemption
    - cost
    - effect of death
    - bankruptcy
    - family law
    - joint and several liability
    - accessing equity
    - disputes
    - one party wants out and the other doesn't


    And there are simple alternatives that are cheaper and won't have the same problems with joint ownership.
     
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  8. mrblack

    mrblack Member

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    Some fair points.

    But we don't live in the property anyway, they do.

    If they want to do major additions/rennovations then they can't get a loan to do so on a property they have no official interest in.

    Basically we want to give them an asset which they can use to borrow against and grow to buy another property maybe in the future.

    What are some cheaper alternatives?
     
  9. thatbum

    thatbum Well-Known Member

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    You're probably better off just directly gifting or loaning them money if you want to help them. Messing around with transferring property titles, especially jointly owned ones is a recipe for disaster imo.

    EDIT: also possibly just leasing it to them under a residential tenancy?
     
  10. Trainee

    Trainee Well-Known Member

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    1m with 750k loan doesnt have much equity to borrow against.

    wanting to do significant renos when they dont have the money is not the sign of financial maturity.

    if they had the money they should just buy the whole property from you.
     
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  11. mrblack

    mrblack Member

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    As mentioned initailly, we purchased this for them a few years ago as they couldn't on their own at the time. They are now in a much better position financially and want to stay in the property.

    Major rennovations being considered is about $100k. Not sure if that is considered major or not ;) and then of course the future propect of borrowing against it once it appreciates in capital etc.

    Keep the ideas coming guys, this is great!
     
  12. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    Can you lend them the deposit for the future property, or for the renovations.
    Parental guarantees also possible.

    Are you saying you don't live in the property you want to make them a part owner of?
     
  13. mrblack

    mrblack Member

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    Yes, we don't live in the property, they do.
     
  14. Trainee

    Trainee Well-Known Member

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    Have you been receiving rent, and have you been claiming interest and other expenses in your tax return?
     
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  15. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    Ok, that would mean CGT would be triggered also.
     
  16. mrblack

    mrblack Member

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    Kind of diverging from my initial query though, which is how would the stamp duty be calculated. Is it based on the new members share (i.e. 500k), or the total market value?
     
  17. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    CGT would be based on the value transferred - 50% would be half the full capital gain.

    If only you took advice when first purchased as you could have structured it so you could have avoided CGT.