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Simple CGT question

Discussion in 'Legal Issues' started by Truly Exotic, 11th Feb, 2016.

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  1. Truly Exotic

    Truly Exotic Well-Known Member

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    I thought I was pretty on the ball with CGT, however I got asked by my relative and the only answer I could give was 'good question, I dont know, ill check and get back to you'

    Husband and wife own a unencombered property,
    husbands name is the one on the title
    Wife takes out a loan on hte property for investment purposes in her name only
    Both retire, loan remains
    they realise that if they sell they are up for a decent amount of CGT
    Wife applies to put her name on the title,

    if they sell, does the CGT split evenly and since the tax free threshold is $18k , then that will reduce the CGT signfinicalty, since they essentially get $36k CGT reduction (assuming both have zero income)
     
  2. Befuddled

    Befuddled Well-Known Member

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    If the property is their PPOR (and has never been used as an IP) then the sale would be free of CGT.

    If it's an IP transferring from husband's name only to wife's name only will incur stamp duty, and the husband would be up for CGT anyway. That's my understanding
     
    Last edited: 11th Feb, 2016
  3. JacM

    JacM VIC Buyer's Agent Business Member

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    It can be possible to obtain an exemption on stamp duty for a PPOR in a transfer of ownership between spouses in Victoria. It was discussed on the old Somersoft forum here;

    Transfer of property to spouse (VIC) - Somersoft Property Investment Forums

    However if it is your PPOR and you're selling it anyway, I don't see any purpose in doing this, since the sale of a PPOR is CGT-free anyway (provided it hasn't been used as an IP).
     
  4. Truly Exotic

    Truly Exotic Well-Known Member

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    apologies everyone should have mentioned, its an IP thats never been a PPOR
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Change of title will be a cgt event. So if wife goes on title with husband he will be selling 50% to her now or whatever percentage is tranfered.

    When the property is later sold both wife and husband will have cgt events on their shares of the property
     
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  6. BennEznElle

    BennEznElle Well-Known Member

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    Terry is on the money again.

    Husband disposes of his 50% share of the property at market value as its a related party transaction. Will have to pay CGT on this. Wife's cost base will be the market value of that share so when they sell the property down the track, need to consider the different cost bases for each persons share.
     
  7. Truly Exotic

    Truly Exotic Well-Known Member

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    thaks everyone, as I suspected putting someone on the title means a disposal which triggers a CGT event , which eliminates the point of trying to reduce CGT
     
  8. USC

    USC Active Member

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    Unless you stagger the transfer and sale over 2 financial years to take advantage of the tax free threshold twice for the husband. Then you only need to worry about the stamp duty on the husband -> wife transaction, which is exempt in Vic.

    Would that plan be ok?
     
  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Maybe worth considering USC plan. Especially where the property is unencumbered
     
  10. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    The OP information is confusing.
    Q : Was the unencumbered prop used as security for a loan to buy a IP in wife's name ?
    q : Why are "they" up for a decent amount of CGT. Isnt the asset hers ? or his ? Not both ?

    IMO changing names of title just makes the CGT issue worse. It triggers a second CGT event.

    Further information needed.