CGT and spousal transfer in VIC

Complex scenario... looking for thoughts/ideas/feedback.

Mr X purchased PPOR in Dec 2009 (sole name)
Mr X moved out in 2011, turning property into IP from June 2011 (positive cash flow but negatively geared after expenses/depreciation etc.)
Mr X and his now Mrs Y plan to move into property in late 2018

They plan on doing small renovations... live in it as PPOR (again) for 6-12 months.Then likely sell.

Mr X was planning on transferring the title to Mrs Y (understanding that it was Stamp Duty exempt in Victoria for PPOR) to lower the likely tax burden payable after selling.

Understand CGT is required for the period it was an investment property... but would the tax still be Mr X's responsibility i.e. the transferring of title will not be retrospective?

Total forecasted profit is $400K (split over the following periods as I understand it is required in this scenario):

Dec09 - Jun11 $100K (is it tax free as it was Mr X's PPOR) - no other PPOR exemptions claimed during that period
Jun11 - 2018 $250K (does Mr X pay CGT or Mrs Y - i think i know the answer here )
2018 - 2019 $50K (Mrs Y to pay CGT)

Anything i should be aware of? I will top up Super's to reduce tax burden but it will likely be tiny as i understand the max is $25K p.a. and likely try and time it when Mrs Y is off work.

Mr X is on the top tax rate and would pay 45c for every $1
Mrs Y has around $70K @ 37c and the remainder @ 45c (assuming they cannot time it when / if Mrs Y is off work)

Happy for the answer to be... pay for expert advice


Regards Mr X and Mrs Y

 

Personal tax advice would address things like the flawed assumption about spouse transfer to reduce CGT. Duty etc. Stamp duty concession has changed anyway and such a transfer may be dutaible now.

Former main residence exemption could be used and all or largely all gain may be exempt.

 

Transfer of title is a CGT event (A1) - even to a spouse.

 

The person who sells the property is liable to pay capital gains tax. You cannot retrospectively transfer property.

If you sell to your spouse you will be deemed to have sold it for market value.

The 6 year main residence exemption might apply depending on the possible enjoyment of the main residence exemption elsewhere.

 

Thank you all... i will use the main residence exemption for my current PPOR for the period 2011 - 2018... so i cannot double up.

SO if i understand it correctly there is really no point selling/transfer the property to my spouse as i will still be liable for the CGT for the period in question (2011 - 2018). From 2018 we will be living it in it as our PPOR so we wont pay any tax for profits made during that period.

 

Yep - And may have to pay duty on the transfer to spouse which may outweigh any tax issue anyway.

This means of seeking advice is a example of high risk outcomes. Forum posts arent a great way to address personal tax advice. Having a tax adviser to do the return also means you have a point of reference for such questions. Loads of small details are missed when a general question and answer is on PC.

Also not only is there one property that can be exempt. That also applies to spouses. They can jointly only have one property at 100% between them and ownership doesnt really factor. They cant each have separate former homes and both access 100% exemptions. So YOUR property (the IP) affects spouse too.

 

Understand and thank you.

I will contact the Accountant

 

Also suggest you carefully look at and run the CG calcs on the current PPOR, by the time you add non-deductible interest, council rates & other holding costs this will reduce the CGT on current holding PPOR.
It may be worth considering 6 year absence rule on property 1 (IP) as mentioned above by others.
Check with your accountant but ensure you give them all the information to check the options.

 

Can someone let me know the tax and stamp duty implications if I add my wifes name on to my 2 IPs in Melbourne which are under my name at the moment

 

CGT on the disposal by you and stamp duty on the acquisition by her.