Stamp Duty (VIC): tenants in common buyout

Hi,

Hoping an accountant or knowledgeable member can assist my thinking.

My PPOR I jointly own with my brother in Victoria. Ownership is in own names via tenants in common structure. I own 60% and he owns 40%.

I wish to purchase my brother's 40% share and I understand Stamp Duty is payable (again!). Is stamp duty calculated on just 40% given I own the other 60%?

I have searched the forum and google searches etc for VIC but with no degree of clarity.

Cheers,
Picket Fence

 

You need a lawyer for duty advice.
It would be based on the value of the amount transferred.

 

The market value, which mat not necessarily be the value of the transfer.

 

I've arranged loans where one sibling was buying another out in Victoria. Stamp duty was payable in each case on the proportion being bought out (in your case the 40%). Market value was determined using a bank valuation, I don't believe the SRO had a problem with this.

You will need to engage a conveayancer or solicitor for this, so they'd be able to give you specific advice as part of that.

 

The duty is merely part of the issue. The other party will have a CGT event to consider for their portion. Lender approval and refinance may need to be addressed too.

 

Don't forget to consider the deductibility of interest issues which could arise in the future if the proeprty was ever rented out

 

You would want it to be arms length as Terry points out. Probably with valuation, market value, contract, new finance and accounting advice.

Good news is that you probably only pay stamp duty due on 40% of the property value. This is a lot less than 40% of the stamp duty due on the entire property value. Likely not much at all.

 

To get this Home Builder grant (25k), singles can’t earn more than 125k. Apparently only poor people can afford 150k renos.

However ‘couples’ earning under 200k are eligible. So I could pair with low earner X on the Title (as well as the application). But then how do I get X of the title?

Can I buy with X as TIC (1/10,000 of a share)? Can X then gift me that share (transfer of title) after I get the 25k? Theoretically, the stamp duty is 0, and CGT is stuff all.

There’s no finance, mortgages involved but I appreciate, I’d have to pay for a valuation at time of transfer.

Could I do it myself? I think it is just a form 1 and 24. Or what cost? (less than 25k I bet).

I know X could in theory refuse the transfer &/or future sale, but he is a willing participant (and has not and will never seek the building grant in futute). Any other risks?

 

Your not a rich person on $126k trying to find a loophole are you?

 

Just supporting our construction industry. Or trying to.

 

You also need to check the state law (which is not yet drafted in any state I believe) to determine if an existing interest change renders the land ineligible for home builder and similiar grants. I would argue the suggestion of 1/10,000 interest TIC may fall within the realm of a scheme - if such a rule is applied.

I believe a TIC interest may be limited to 1% minimum and then it could still be a scheme if there is never a true legal interest created. That other legal interest couldbe a trust or sham interest. Terry have you seen a fractional interest ? I havent. Otherwise it would be possible to have a 1/1,000,000,000 fractional interest for tax purposes which is functionally 0.00000000%. Loads of people would then do that for title security purposes.

substantially renovate an existing home as a principal place of residence. It doesnt mention other ownership interests other than as I note below. This is further supported by this comment :The applicant(s) must be listed on the certificate of title for the property but it doesnt mention more. ie Can a owner not be an applicant ? A legal interest and PPOR occupancy test and spouse test under existing legal definitions must be met for applicants.

Definately one for legal advice ONCE laws are known and passed whenever that may be.

 

Land not yet purchased. Any transfer would not happen until the grant was received and eligibility period was fulfilled... *Should* be straightforward....

 

I would imagine its fraud.

 

What do the SRO call/qualify substantial renovation, out of curiosity.

 

Their website contains the requirements eg who does the work, contract issues etc. The words substantial renovation likely assume their ordinary meaning ie to retain the structure or minimally alter the structure but to renew, refresh, repair and/or may include addition, removal and alterations etc. Adding to the structure may also be a substantial renovation (note the words "does not need to involve"). There can be catches with contracts, licensing, dates and more :

Read it all HomeBuilder Grant guidelines | State Revenue Office

But simple description is

Eligible substantial renovations
For the purposes of HomeBuilder, substantial renovations can be either:

• substantially altering the existing dwelling, or
• demolishing your home and building a new home on the land,
  • Note: For a demolition and rebuild to be treated under the substantial renovation category, both the demolition and rebuild must occur on or after 4 June 2020. If the demolition occurred before 4 June 2020 (i.e. the property was vacant land as at that date), a contract to build will be treated under the comprehensive home building contract category.

To be considered substantial, the renovation does not need to involve the removal or replacement of foundations, external walls, interior supporting walls, floors, roof or staircases. However, it should improve the accessibility, safety or liveability of the property. Given these requirements, a substantial renovation does not generally include:

• Stand-alone granny flats, swimming pools, tennis courts, and structures not connected to the building such as outdoor spas, saunas, sheds or stand-alone garages.
• Renovations that are primarily cosmetic in purpose such as landscaping, painting or re-carpeting

 

The minimum contract price should be $150k. Thanks @Paul@PFI for sharing the details.