Stamp Duty on 50% purchase from passed Estate.

I think I know the answers to these but sometimes you can get surprised.

If a property is passed to my brother and I via a deceased estate and instead of selling I wanted to purchase the other half, would I be right in thinking.

1 - Stamp duty would apply on the amount I purchase (50%).

2 - If I instead wanted to purchase it via a SMSF I would need to pay the full 100% stamp duty?

3 - For future capital gains the market value would be set by the banks valuation or a quantity surveyor report?

 

1. Yes
2. You pay no stamp duty because you are not buying it the SMSF is. But if it is residential it would be a breach of the SIS act as related party. If business real property then it may be possible and there may be an exemption depending on a few things.

3. not sure what you mean. The cost base would be worked out under the tax laws. If a main residence of the deceased at their death it would be the value at the date of death. If an investment property then the cost base of the deceased.
(general rules).

When transferring CGT will be triggered too.

A way around this is to seek legal advice and consider entering into a deed of family arrangement where the will is 'bent' so that in exchange for your brother not contesting the will the executor and effected beneficiaries agree the brother should get the whole property.
Note that this doesn't work for stamp duty in all states. I think SA is one where the duty would still apply.

 

Just on this, without going down the path of bending the will and just purchasing my brothers other 50%, is their anyway you can think of to maxamise the loan?

Given I would inherit 50% unencumbered, I am thinking I can only lend the 50% plus costs secured against the property.

 

Interest is only deductible for loans used to acquire income producing property. If you are getting your 50% for free via the inheritances you cannot borrow to acquire this.

But if you buy out the other owner you could borrow to do so.

 

Thanks Terry, correct I am talking about borrowing to buy the other 50%.
I am guessing I can only lend the 50% half plus the stamp duty (secured against the property).

Basically seeing is their is any tricky way to macamise the loan amount to claim a higher deduction. Not sure their is though.

 

Are you lending or borrowing?

 

Sorry totally stuffed my terminology.
Borrowing from the bank to buy the other 50%.

 

Did the deceased have a loan on the property?

 

No the property was unencumbered.

 

I don't see anything you could do in that case.

 

Didn't think so. Thanks Terry!

 

Could you borrow more for renovation, payment of rates etc. Leave the excess in offset and draw it out as rates fall due/renos completed?

 

You cannot buy a property in full or a share of it (resi property) from a deceased estate in a SMSF if you are a relative of the deceased. You also cannot buy your brothers interest in your SMSF either. A Part 8 Associate is prohibited by s66 of SISA from a related party acquisition. The ATO consider a executor is also a related party if you are a beneficiary of a estate.

The appropriate strategy is to have the executor sell the property and then cash is distributed IF THE WILL PERMITS THIS and the cash is contributed to your fund.

 

Yes

But if you mean borrow and put funds in offset the interest won't be deductible

 

Is that because the redraw has to come straight from the loan account? I have this issue with my account, I can only redraw to offset and then offset to another account which the bill is paid from. I always draw the exact amount and pay the bill immediately out of the third account so there's no disputing what purpose the money was for.

 

Mixed purpose loan issues for one see tax tip 1

 

Specific identification isnt accepted by the ATO and its still blended. In fact each time you do that it may just be making it worse.

 

Sorry I mucked up the details. I can't pay bills direct from Mortgage so I redraw into an account thats only other use is to receive my salary (no offset account involved). Is that acceptable? There is no other means as the lender will not allow payment direct from the loan account.

 

Tim that would cause a mixed loan.

 

I have split the loan so all expenses for properties A, B and C come from splits A, B and C.

However the account I redraw to to pay the bills is the one account. If I had three separate accounts would that solve the issue? I.e. split A to account A, split B to account B