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Divorce

Discussion in 'Accounting & Tax' started by iinvestor, 10th Aug, 2015.

  1. iinvestor

    iinvestor Member

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    Hi,

    Going through a divorce at the moment. We have a few properties and they are all under both our names.

    Needing some financial and tax advice. Can anyone recommend anyone here?

    Also, if we are to have only one of our name on the title, do we have to pay stamp duty?
     
  2. D.T.

    D.T. Adelaide Property Manager Business Member

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    Sorry to hear about your situation.

    Stamp duty rules differ by state I believe, which states are the properties in?

    Is the plan to keep the properties but divvy them up to own some each? In which case you need a broker who has dealt with this before who can arrange the finance to "buy out" each other. I know @Corey Batt is dealing with a similar case at the moment.
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Generally stamp duty exempt on transfers due to the break down of a marriage. CGT is also not triggered, but the new owner will inherit the CGT liability which needs to be taken into account with property settlements.

    Also depending on which state they are in the situation may work out better if the outgoing spouse sells to the other as then the loan interest would be deductible. If a transfer under a family law settlement the interest on any loan used to do this would not be deductible.
     
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  4. Befuddled

    Befuddled Well-Known Member

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    I think you need legal advice first and foremost. Terry's your man
     
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  5. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Why is that Terry? If it's an IP, wouldn't the purpose of the funds be to acquire an income producing asset?
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    No, it would be to pay out a spouse - a private expense.
     
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  7. thatbum

    thatbum Well-Known Member

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    Financial and tax advice might not be a first port of call if you haven't yet decided on how you want to divide the marriage assets. How far along are you with that process?
     
  8. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Yuck.
     
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  9. DanW

    DanW Well-Known Member

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    I've been through this before. I only bought out 1 property, and that was in NSW.

    One difficulty we had was coming to agreement on the fair market value for the transfer. We had a variety of valuations. This will be up to your legal advice how to do this, and/or to discuss between the two of you. Usually if you can't come to agreement on the market value of each place, selling is the only way to know the TRUE market value unfortunately.

    My conveyancer did a stamp duty exemption so that part was fine (NSW)

    I had to refinance the loan for the new title ownership.
    This resulted in fixed rate break fees of more than $20,000, so consider that if you have any fixed rates.

    I was able to claim the interest on the property buyout as tax deductible, to acquire 50% of income producing asset.
    The accounting costs were a bit more than usual, as my accountant had to do quite a bit of research in order to allow claiming this.

    In my advantage the split was amicable, and the order was written in such a way that the money was consideration for the asset. If it's not a consent order, and goes through the courts, then I don't know if you can do this it would probably be harder and like Terry says.

    But you need some good advice - especially accounting advice if you want to maintain deductibility of the new interest from the new loans.

    I saw 3 accountants before I found one willing to help, because it's a grey area.
    I can refer you to mine if you need, he's based in Sydney CBD.

    Feel free to PM me if you want to know more.

    Good luck!
     
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  10. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Thanks for the explanation Dan.

    Did you get a private ruling for the interest deductibility bit? I have been searching the private ruling register but am yet to see one where the interest was deductible.
     
  11. DanW

    DanW Well-Known Member

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    No we didn't go for a private ruling.

    We did instead create massive amounts of documentation and a big file note with evidence that the money is for acquiring the property, just in case it is ever questioned.

    If the property was not going to be transferred to me I wouldn't have to pay a cent, and vice versa. If the property was sold there would be no transfer of assets required etc. That's the main reason for taking out the new loan, and not to settle a domestic situation but to acquire an income producing asset.

    It was a balancing act to keep it like a purchase (for the loan interest), but at the same time be eligible for stamp duty exemption.. accounting advice was very important in this case.
     
  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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  13. DanW

    DanW Well-Known Member

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    Those situations are a bit different to mine.

    First and third ones also include primary place of residence.

    Second one the primary reason was to "in order to comply with the Family Court (FC) settlement".

    Specific personalised advice is needed, all cases are different.
     
  14. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes all cases will be different. All you can do is to rely on the advice you have been given by a qualified professional.
     
  15. RPI

    RPI Property Lawyer, Town Planner Business Member

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    No stamp duty exemption in QLD unless you have stamped consent orders from the Family Court - primary reason that we started another division - Certus Family Lawyers. Sending people to family lawyers and they were getting shafted on costs.
     
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  16. iinvestor

    iinvestor Member

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    Thank you all for your replies so far.

    All properties are in Brisbane. This is my first step, since this is already a stressful process, i would ideally like to keep the costs down.

    Are there any free or low cost services Qld government or any other governing bodies in Qld offer?
     
  17. thatbum

    thatbum Well-Known Member

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    You haven't mentioned how far through the process you are, or what part exactly you need help on. If its simply tax and financial advice, I doubt there's any government subsidised service for that.
     
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  18. RPI

    RPI Property Lawyer, Town Planner Business Member

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    There are do it yourself kits on the family law courts.
    http://www.familycourt.gov.au/wps/wcm/connect/fcoaweb/forms-and-fees/court-forms/diy-kits/

    We do consent orders fixed price. $2750 inc GST. If both sides agree on the split that is the best way. You can work your way through the DIY kits yourself. you will need to get a fair amount of documentation witnessed by a JP or a solicitor. Consent orders are not rocket science, BUT they are very time consuming. If you have the time do it yourself. We only employed a family lawyer to start that division because, even though we sent people the DIY kit link, lots can't be bothered and end up paying the stamp duty (not to mention that the don't have a permanent resolution).
     
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  19. iinvestor

    iinvestor Member

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    This is our first step in the divorce process.
    we have 2 options in mind

    1. The properties are under both our names. If the stamp duty does not apply in QLD, divide the properties depending on the valuation, evenly and then start the paperwork for the divorce process.
    So, does the Qld law allow us to separate the properties under individual names without having to pay the stamp duty?

    2. If the stamp duty applies, we were thinking of selling the properties and divide the profits evenly.

    When is a good time to sell the properties to minimise capital gains tax?

    We both are currently working. Once we sell the properties, i have plans to quit work and travel for a bit.
     
  20. MikeLivingTheDream

    MikeLivingTheDream BCOM MCOM MTAX CPA CTA Registered Tax Agent

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    The ATO generally holds the view that refinancing to payout a partner for a settlement in divorce is generally a private expense and the interest is not deductible. All private rulings I have seen and advice from the NTAA has indicated such. Would be interested to apply for a private ruling on the specific matter to see if you got a yes. But based on past cases I doubt it would be deductible.
     
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