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Selling Wife share to Husband.

Discussion in 'Accounting & Tax' started by Byeow, 20th Oct, 2015.

  1. Byeow

    Byeow Member

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    Hi,
    Could I get some advise.
    I have a PPOR (paid off) and an IP (with loan).

    My problem started when I bought my IP, I put in too much of my own cash as oppose to borrowing more. (Which the bank would be happy to give me).

    Few years later, now I have decided to knockdown and rebuild my home. However I need to borrow some $$ to finance this project.
    Since is not for Investment is not tax deductible.

    A plan would be if the IP were to be owned 50/50 share between my wife and myself.
    I just get her to sell me 20% of the her share. Then I could increase the loan of my IP.
    (In VIC, no stamp duty payable for husband and wife, I only have to pay for solicitor fees etc. to do this).

    However Unfortunately for me. The share is not 50/50, it was set up as 95/5. LOL.
    Could I then sell 20% of my share to my wife. (No bank loan involved. just a "formality" transfer )
    And then almost immediately my wife will sell me back the 20% of the share. I will get a loan to pay for this 20% share.

    I understand CGT is payable especially in the 1st transaction. Since the property price has increased.

    In Short, basically I'm looking at increasing my existing IP loan so that I have more $$$ for my home rebuilding.

    Is this doable?

    Thanks.
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes doable and interest could be deductible under s8-1 but the ATO could deny this interest claim if they think it is a scheme to increase tax deductions - which is what it is?

    What reason would you have for selling and immediately buying back?
     
  3. Byeow

    Byeow Member

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    To increase my IP loan. That's why I'm doing this. Hope it make sense...
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Interest deduction denied!
     
  5. Byeow

    Byeow Member

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    So you are saying transferring your shares of a property between husband and wife is legal.
    However if ATO knows your true intentions to benefit of interest deductions will be denied.

    What will be the reasons of property shares been transferred between husband and wife other than for tax purposes?
     
  6. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

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    Firstly you should see if your husband is into that sorta thing before trying to sell wife sharing to him :D
     
    chylld, Scott No Mates and The Y-man like this.
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes. This is an artifiical scheme designed to increase deductions. If it wasn't for the increased deductions you wouldn't do it I presume.

    Transferring the property once may be fine for estate planning reasons, but transferring it back again (at least this is how I interpreted your post) will raise big questions.
     
  8. Byeow

    Byeow Member

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    Thanks for your reply,
    I understand what you are saying now.
    As long as I can come up with a good reason if not it will be concluded as tax avoidance.

    Back to the drawing board. ;)
    .
     
  9. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    A change of ownership is a sound reason. eg sell 50% to spouse rather than ownership in just one name. Reasons could include asset protection and to share a marital asset. May also be eligible for stamp duty concessions in some states. But changing ownership for the reason of a increased loan appears a scheme to obtain a tax benefit.
     
  10. Greyghost

    Greyghost Well-Known Member

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    If the only reason in doing it is to obtain a tax benefit it will be deemed a scheme by the ato..
     
  11. Scott No Mates

    Scott No Mates Well-Known Member

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    @DaveM is it cheaper to share one wife or own outright considering that they depreciate rather quickly and can be high maintenance.
     
    Last edited: 24th Oct, 2015
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  12. Bran

    Bran Well-Known Member

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    I very much misread that title.
     
  13. mrdobalina

    mrdobalina Well-Known Member

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    Would you recommend getting a depreciation schedule?
     
  14. Scott No Mates

    Scott No Mates Well-Known Member

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    @mrdobalina - there'd be a few bits of capital works to depreciate eg: the implants, nose job, nip & tuck but the botox, hair, nails, pedicures etc would be maintenance ;)
     
  15. mrdobalina

    mrdobalina Well-Known Member

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    Sounds like a development site. Better value to knock it down and build new units.
     
  16. Esh

    Esh Well-Known Member

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    I thought I was the only one who read it differently lol
     
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  17. DaveM

    DaveM Adelaide Buyers Agent & KFC Strategist Business Member

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    No a spread sheet would be fine for checking out the assets
     
  18. Scott No Mates

    Scott No Mates Well-Known Member

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    Just put her over the pits.