Buying out a partner - tax deductible debt

So, Say I buy out my partner - currently owned 50/50:

Original purchase price: 400k
Current mortgage: 250k
Current value: 800k

Value of the share being sold: $400k

My new tax deductible debt attributed to the investment is:

1. 50% x 250k (Original mortgage)
2. 400k (New mortgage for buy out costs)

Total = 650k

Am I on the right track?

Note: CGT, Stamp duty and costs are ok.

 

50% × 250k =125k existing debt.
+400k new debt
=525k total debt (excluding costs)

 

York is right.

Don't forget stamp duty and conveyancing costs.

 

Even if it's an IP, the 400k portion might not be tax deductible depending on how you structure it?

 

Forgiving my poor math - thanks.

In terms of structuring, it will be a straightforward market rate purchase - DT - what should I look out for?

 

CGT Market value substitution rule applies if its not transferred at $800K total value (ie $400K)
OSR will require a valuation for duty assessment as its not arms length
Repay 50% of the original loan as it would no longer be deductible.
In NSW this transfer is dutiable unlike a spouse transfer that results in 50/50 while occupied.
Land tax impacts ?? Land Tax clearance certificate issues ??

If its a transfer due to relationship breakdown there are concessions to discuss with lawyer (not conveyancer)

 

From a tax perspective, what is the value of the property? Is it an agreed value between parties, the market value, or the OSR assessed value?

 

Market value. See market substitution rule.

 

Is it residential ? If not then GST could complicate it further. I have had many enquiries about spouse refinancing and then later they disclose its commercial. The inability to fund the GST can be a deal killer.