Shared Ownership /Transfer of title.

Discussion in 'Legal Issues' started by Chris1992, 8th Dec, 2017.

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  1. Chris1992

    Chris1992 Active Member

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    Hi,

    I had a legal question in regards to selling out of a property with 1/3 share ownership. I am considering selling out my 1/3 share to the other two owners giving them 50% ownership each. My question is, after selling, legal and all other costs are divided equally in 1/3 am I then entitled to the full remainder of the profit that the property has gone up in equity or am I only entitled to 1/3 of the profits? I understand if we were all selling the property to new owners that we would recieve 1/3 of the profits equally, but because they are staying on to be joint owners are they really entitled to any of the sales profits of getting me out of the property considering I am the only one paying Capital gains tax and not them?
    Any advice would be appreciated thank you.
     
  2. Trainee

    Trainee Well-Known Member

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    Your post is very confusing.

    Determine market value. They pay you 1/3. You pay taxes. Thats it.
     
  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Up to the parties to agree.

    As an example
    property purchased for $300,000
    each has a 'share' worth $100,000

    Property now valued $600,000
    each has a share of $200,000

    Therefore if they want to buy you out they would pay you $100,000 each = $200,000
    They pay stamp duty
    you pay CGT
     
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  4. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Good example of why legal advice is a benefit. It would addess this issue.

    When you normally agree to sell you would factor in present value. So you surrendur all rights based of taking profit to that point. And you pay your share of tax.
     
  5. Chris1992

    Chris1992 Active Member

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    Hi thanks for the replies everyone. I should probably mention we each paid a $20k deposit initially so we don't own the property outright to be divided its full value. Instead I'm assuming i'm only entitled to 1/3 of the profit after all taxes paid (which we have agreed to share)
     
  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Why would you expect them to share in your taxes?
     
  7. Chris1992

    Chris1992 Active Member

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    That is just what they have agreed to in order to share the profits, otherwise I'll have to pay the taxes out of my savings as the equity made wont cover the costs. So instead they are reabsorbing their share of the tax debt into the original investment loan. Perhaps its best for me just to pay all taxes and recieve all profits after sale?
     
  8. bunkai

    bunkai Well-Known Member

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    I would have thought that any capital gains tax would be <100% of the equity gain.

    You are only triggering CGT on your 1/3 share of the property

    You really need to see an accountant.
     
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  9. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    CGT would only apply to the portion transferred and it would be the sale price/value less the cost base of that portion.
     
  10. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    But this would be your profit as they are not selling their share of the property. Legally you would be liable for the tax as it won't trigger a CGT for them.
     
  11. Chris1992

    Chris1992 Active Member

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    Thanks for that. I think I'm going to just agree to pay all the associated costs and taxes in order to recieve the total profit as opposed to 1/3rding everything.
     
  12. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    The others are not liable for any CGT on the transfer, and you are not liable for the stamp duty on their purchase - if you want to pay it that is up to you, but you couldn't claim this or use it to reduce your CGT.

    Don't forget the loan costs - new application is needed, discharge of mortgage and registration of mortgage too.
     
  13. Chris1992

    Chris1992 Active Member

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    Oh so I don't have to pay their share of their stamp duty? Only the associated legal costs, selling costs, loan costs and my CGT seeing as I am the only one selling? The issue is it is owned with family members, 2 sisters to be exact so I don't want to have a falling out based upon this. I just want to know what I am legally entitled to.

    So far I see two scenarios:

    Scenario A: We split all costs of selling the property equally including their stamp duty but I pay full CGT. I then recieve 1/3 of the total profits after all these expenses paid. (This is the scenario they want)
    So say if Expenses = $10,000 I pay one third ($3,333) and property has increased in equity by $20,000 ($6,666). I am only entitled to $6,666 at the end.

    Scenario B: I pay for all selling costs including their stamp duties each x2 (Which from what you have told me, I don't have to do). I will also pay all the legal costs, and loan application costs which is what I am expecting to.
    In this scenario I pay all expenses ($10,000) and that at the end I recieve all the profits ($20,000)
    This is the option that I want as it results in a higher profit but is this the correct way of approaching this matter?
    Thank you.
     
  14. Scott No Mates

    Scott No Mates Well-Known Member

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    Why over-complicate things? You are selling your ¹/³ share for $X. Your partners pay you ¹/6 each. Each party worries about their own affairs.

    Using your logic, will they ex-partners pay you a share of the profits when they sell sometime in the future?
     
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  15. wylie

    wylie Moderator Staff Member

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    Why would you pay any more capital gains tax than that attaching to your share (or am I reading this wrongly)?

    I think you need to get legal advice, so that the family tie is removed from the equation and treat this like you have bought with two non-family members and are selling your one third share to those people.

    You just deal with the costs involved with your one third share, and if they want to each buy half of your one third share, they are up for the costs involved in doing so. Why should you pay for their costs?
     
  16. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Why are you basing it on increased equity? You should be basing it on sale price less purchase price and your costs..

    I think you are confused, and a better way to consider this is to think you all each own 1 of 3 properties. You are selling one property.
     
  17. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    And lets assume the loan originally was $270,000.
    Your 1/3 of the loan is $90,000.
    So your 'profit' would be $200,000 but you would still have to pay out $90,000 of the loan so you would be left with $110,000 (but pay tax on $100,000 less 50% CGT discount).
     
  18. Leeroy93

    Leeroy93 Well-Known Member

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    Is this an investment or PPOR? You may not be liable for CGT.
     
  19. Chris1992

    Chris1992 Active Member

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    Investment so I will have to pay. As I am to understand I am going to pay all fees and taxes and CGT and then I'm entitled to 100% of the profits - those expenses
     
  20. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    On your share of the property.
     
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