Tax Question - Transfer to Spouse

Discussion in 'Accounting & Tax' started by evalord, 13th Dec, 2016.

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  1. evalord

    evalord Well-Known Member

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    I have a questions regarding transferring 50% of a property under my name to my partner.

    In QLD, there's no stamp duty on the transfer.

    Total cost for the property was 800k, with 400k on interest only loan + offset account. PPOR currently, plans to covert to IP potentially in the near future.

    When the property becomes an IP, are the following assumptions correct?

    1. I'm liable for 100% borrowing costs, 50% management/maintenance costs, receiving 50% of rental income
    2. My partner liable for 0% of borrowing costs, 50% m/m costs, receiving 50% of rental income.
    3. $0 transfer duty
    4. Tax benefit because I'm on higher income.
     
  2. Terry_w

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

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    1. no
    2. no
    3. no
    4. no
     
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  3. evalord

    evalord Well-Known Member

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    Terry, can you please elaborate? When I transfer, do I also transfer the debt?
     
  4. Terry_w

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

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    You can't transfer the debt. New loan applications will be needed.

    Is your wife buying out your share or is it a gift?
     
  5. Big Will

    Big Will Well-Known Member

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    Can your wife afford the total debt of the property? The bank has you on the mortgage so unless she can cover it by herself then this is going to be the first hurdle.

    Banks will not let someone own the asset and another person own the debt unless you are putting up another asset as security I would assume then okay.. maybe.

    Think about it from the bank's perspective would you lend a friend 400k for their wife to buy a house but the friend has the debt. If the friend defaults what course of action do you have to retrieve your money. Also if your friend's wife was unemployed would you give the debt to her to buy a place knowing she cannot pay it back herself?

    Even if it was possible how would you get 50% of the income with 0% ownership?

    Stamp duty in QLD is still payable IIRC, if you changed it to be 99% wife and 1% you it is likely you can get away without stamp duty but to bring you to 0% it is constituted as a new purchase. I think only VIC allows for this but they charge a higher amount of stamp duty to begin with.

    Go seek tax advice from a qualified accountant and not on a public forum.
     
  6. Terry_w

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

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    Big Will I think you misread the OP. 50% of the property is to be transferred, so I assume that husband and wife will end up owning 50/50.

    This is a legal question too - not one for an accountant.
     
  7. Big Will

    Big Will Well-Known Member

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    Yeah I did, as they say men cannot multitask.

    Agree I would also seek legal advice as well.
     
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  8. dabbler

    dabbler Well-Known Member

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    The person/s on title is the one that gets the income/tax/fees/benefit/liability
     
  9. Paul@PAS

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

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    Issues
    - Wife must borrow her $ borrowing and your share of existing loan becomes non-deductible even if its not paid out by her $. Your % may have a loan and hers might not.
    - CGT likely 100% or part exempt BUT....do you understand how your spouse affects this ? Between you there is just one main residence exemption.
    - The duty exemption in QLD comes with a catch... "Gifting" problem may affect loans. CGT rules however operate on market value.
    - Even a 1% change is dutiable in QLD.
     
  10. Elives

    Elives Well-Known Member

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    so if spouses change the ownership % in qld or remove 1 spouse's name. is stamp duty payable? and if so is it the normal amount etc if they have 50/50 on a 500k house. would the whole stamp duty of the 500k house be payable if they transferred into 1 spouses name?
     
  11. Terry_w

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

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  12. Elives

    Elives Well-Known Member

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    thanks Terry, i had a quick read of the thread. so basically the niche is if spouse 1 transfers 50% to other spouse its stamp duty exempt but if theres break down in the relationship and it goes from 50/50 to just 1 spouses name. the whole stamp duty is payable again? not a discounted rate. thats sucks haha
     
  13. evalord

    evalord Well-Known Member

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    Terry, if the transfer is completed while the property is PPOR then some time later, it turns into an IP. Are you saying the whole loan is not deductible because no consideration was paid for the transfer?
     
  14. Terry_w

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

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    If A transfers 50% to B so that the owners are A and B 50/50 there is no stamp duty ONLY IF there is no consideration given by B to A for the transfer.
     
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  15. Terry_w

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

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    If there was no consideration for this transfer then at most only 50% of the loan could be deductible - to you.

    Eg.

    $500,000 property with $200,000 loan (used to purchase the property) owned by A only.

    A transfers 50% to B. A can now only possibly claim the interest on $100,000 of the loan. B cannot claim anything, even if there is a loan on the property and even if the loan has increased because the loan would not relate to the purchase of the property.
     
  16. evalord

    evalord Well-Known Member

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    Thanks Terry, this makes perfect sense.
     
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