Is it possible to claim the CGT exemption for a PPOR if the property in question is held in the name of a company (and the individuals are directors)? Thanks Al
Main residence exemption is only available to a legal owner or indirectly through a spouse election. eg two singles each own a PPOR meet and live in one of them. They must make a choice about which main residence exemption is used / shared from that point. No double dip. ie His 100%, Hers 100% or 50/50. Not available to a company, trust or a non-resident (generally)
I believe that is a way of getting the main residence CGT exemption where a trust owns property by utilising a life interest strategy - the beneficiary is allowed to live their for life. Not sure how this works though.
Take care with that. The land tax problem might outweigh other issues. There is a trademarked trust deed that some promoters tried and tried and tried to argue this point... OSR wouldn't have a bar of it as it fails the NSW fixed trust. And there can be duty issues in some cases.. I did say "generally" in my post expecting someone may raise the life interest. Of course a company cannot provide a life interest.
Hi Terry and Paul, I'm aware of a situation where an individual's home is owned by a company, of which the individual is the director and sole shareholder of the company. If they wanted to transfer ownership of the property from the company into their individual name, what might the implications be? - CGT - gain taxed at 30%, no PPOR exemption or 50% discount? - Stamp duty (VIC). Is this applicable? - Is there a way to obtain a favourable valuation for determining the above taxes? Are there any strategies to reduce or avoid the above? I know this might not be simple, but your thoughts/ideas would be appreciated.
Another thing occurred to me. If the company has no other assets, sells the property and pays CGT at 30% on the profit. It would then make a distribution of profits to the shareholder, along with franking credits. So if the shareholder is on a low MTR the distributions could be spread over several tax years and they could then would receive a refund of franking credits. Am I right on this?
Stamp duty, legal costs and income tax (CGT with no discount.) all based on market valuation. The sole strategy I know is to NOT buy your home in a company. You could expose yourself to FBT problems in the most extreme examples also. An individual's home ??? No its the company's property. A company owning the property is akin to living in a rental. You do not own it. It may also be exposed to estate planning problems too. If there is a reason NOT to personally own assets then PC isnt the place to seek solutions. A good lawyer needs to advise on asset protection and trusts often are considered. Trusts can have some favourable outcomes in Vic for that issue.
I know someone in this situation. Hence I'd like to understand some of the implications because I realise it's not good. It's not a strategy I'm looking to get into!
Possibly. You would need to retain the proceeds in the company all that time. It may mean that the annual dividend to the shareholder needs to be less than $14,700 a year approx to a "no other income" shareholder or a tax issue may dilute that refund. ($14.7K grossed up = $21K pa which is approx the tax free threshold after offsets)
Yes, provided each share is accompanied by a right to occupy. "Ownership interest" includes a share in a company that owns an interest in land where the share gives a right to occupy, s.118-130. Not a common structure these days, originally used for apartments. It is possible to convert ownership to strata title without incurring CGT for 'continuing owners'. However, each state has its own stamp duty rules.
