Costs incurred when buying out joint tenants

Discussion in 'Accounting & Tax' started by sarhil, 31st Oct, 2016.

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  1. sarhil

    sarhil New Member

    18th Feb, 2016
    There is a family property held by myself and my 2 siblings as joint tenants, which is now to be sold. I am considering "buying out" my siblings to own the property outright and am just wanting to know of implications regarding taxation, stamp duty and any other issues I may need to consider/be aware of.
  2. Ross Forrester

    Ross Forrester Well-Known Member Business Member

    30th Oct, 2016
    Perth, Western Australia
    The amount paid to buy out the other party will form part of your total tax purchase price of the property. This will eventually reduce your capital gains tax on sale. You will more than likely pay stamp duty on the purchase price but it depends on the state and you might enjoy some concessions in very limited circumstances.
    Perthguy likes this.
  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

    9th Jun, 2006
    Australia wide
    Stamp duty will be calculated on the value transferred. I don't know of any states with concessions for this.

    You will have mortgage discharge fees and new loan application fees (if any).

    Conveyancing costs.

    It will also be a CGT event.
    Perthguy likes this.
  4. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

    18th Jun, 2015
    And quite importantly - If the value agreed by the parties (siblings) is not market value a special CGT rule applies which substitutes market value for income tax (CGT) purposes.

    What are capital proceeds?

    For the sibling who is buying out the other they will then effectively own two CGT parcels of the same property each with its own distinct costbase. I'm just doing a return for clients with FOUR CGT parcels for the same title.

    1. 33% share pre-CGT
    2. 33% share pre-CGT from Mothers estate
    3. 13% share post CGT from his Fathers estate (was originally 33% also); and
    4. 20% share owned by spouse which was once part of item 3 but was gifted to spouse at market value. This portion includes duty and legals.

    Its just as important to retain good CGT records when dealing with related parties as any other asset.
    Terry_w likes this.