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Tax Tip 103: Transfers Between Spouses and Stamp Duty in VICTORIA

Discussion in 'Accounting & Tax' started by Terry_w, 24th Mar, 2016.

  1. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Transfers of Land Between Spouses and Stamp Duty in Victoria


    This is a brief summary involving transfers of land between someone to his or her spouse or ‘domestic partner’ during the intact relationship (leaving aside the situation on the breakdown of a relationship, Family Law style).


    Relevant Legislation
    Section 43 of the Duties Act 2000 (VIC)
    DUTIES ACT 2000 - SECT 43 Marriage and domestic relationships


    Who does it apply to?
    This applies to spouses or those in a domestic partnership.

    ‘spouse’ for this Act is defined under s3 as:
    "spouse" of a person means a person to whom the person is married

    ‘Domestic partner is defined under s3 as:
    "domestic partner" of a person means a person with whom the person is in a domestic relationship;

    "domestic relationship "means—
    (a) a registered domestic relationship; or
    (b) a relationship between two persons who are not married to each other but who are living together as a couple on a genuine domestic basis (irrespective of gender);


    Transfer from one name to both names possible?
    There is an exemption for transfers from transfers from one spouse/domestic partner to both.


    Transfer from one name to the other name possible?
    Yes, one spouse/domestic partner can transfer to the other with the full exemption available.


    Investment Property?
    Yes, the full exemption applies when transferring an investment property or a main residence where one or both of them will end up as the final owners.


    Consideration?
    There is no requirement for the transfer to be a gift. A transfer at full consideration can still exempt from duty.


    Summary
    Victoria has a generous stamp duty exemption for transfers between spouses or domestic partners including:

    · Exemption for transfers from A to B (or B to A);
    · Exemption for adding A to the title of B’s property;
    · Exemption for A and B as tenants in common changing the percentage of ownership between themselves;
    · There is no distinction between owner occupied properties and investment properties.

    Victoria is the most generous state in Australia for transfers between spouses. Provided you think the area is a good investment buying in Victoria can allow for various strategies which can be used to help debt recycling and the paying off the non deductible home loan sooner.


    Tax Issues
    Advice should be sought on transferring the interest for full market value so that any future renting of the property can result in the loan interest associated with the purchase of the property to be deductible.
    See Tax Tip 15: Transfers for No Consideration and Deductibility of Interest. Tax Tip 15: Transfers for No Consideration and Deductibility of Interest

    Transfer of title is a CGT event with the transferee (the one transferring) being the one to pay the CGT unless an exemption, such as the main residence exemption, applies.
    See Tax Tip 100: Transfers between Spouses and CGT, Tax Tip 100: Transfers between Spouses and CGT


    Lending Issues
    Any change in title will mean the mortgage has to be discharged and a new loan applied for under the new owners names. Where both parties are borrowers originally there must still be a discharge of mortgage because title will change from one name to two. This will probably result in a need for the lender to requalify borrowers again.


    Legal Issues
    See your lawyer before attempting this as many side issues are involved.
    Legal Tip 95: Spousal Transfers and Some of the Legal Issues, Legal Tip 95: Spousal Transfers and Some of the Legal Issues


    Land in Other States
    NSW: Tax Tip 68: Transfers Between Spouses and Stamp Duty in NSW

    QLD: Tax Tip 68: Transfers Between Spouses and Stamp Duty in NSW

    ACT: /community/threads/tax-tip-102-transfers-between-spouses-and-stamp-duty-in-the-act.9357/
     
    Last edited: 24th Mar, 2016
    bythebay, Mitesh Dedhia and S0805 like this.
  2. Andrew Parkinson

    Andrew Parkinson New Member

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    Hi TerryW -

    With regards to the point you make about the possibility of the transfer being made at full consideration. I own my place 100%, but I want to sell my house to my partner, so that she can raise a loan, call it an investment property and claim all interest as deductible. Of course we want to do this without paying Stamp.

    If on the Land Title Transfer form I select 'monetary' and specify a value e.g. $500,000 rather than selecting 'non-monetary' and selecting 'For natural love and affection', you are sure that I/we can still claim the Stamp Duty Exemption??

    Seems too good to be true. Surely partners could transfer Title back and forth on any property and shift any equity into deductible loan, e.g. I transfer my 50% to partner, then buy 100% back with an investment loan. ATO wouldn't be happy surely?

    Thanks
     
  3. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    The ATO wont see it the same way. If its a IP then makes sense but not if you live there. Its a scheme.
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes you should be able to avoid stamp duty. You can have a look at the act which i think i mentioned above. S 44 from memory.

    But seek income tax advice first and you want to consider part iva. A private ruling may be worth considering
     
  5. S0805

    S0805 Well-Known Member

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    read the document guide & stat dac form for transferring properties between spouses. Interesting that they don't allow value to be entered when selecting 'non-monetary' consideration and 'love & affection' is only selectable when 'non-monetary' is selected. That means when transferring between spouses under 'love & affection' property value at transfer time is not recorded at all....
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I would disagree with this.
     
  7. S0805

    S0805 Well-Known Member

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    fair enough Terry. sound odd to me as well....however this what I've found....
    attached guide (refer to page 4, non-monetary consideration, no mention of amount to be entered) & stat dec Transfer between spouses/domestic partners statutory declaration | State Revenue Office

    On contrary below from their FAQ...but no mention of non-monetary consideration...

    Can you process a related parties' transaction?
    Yes, as long as there are no exemptions or concessions involved (other than a domestic partner/spouse exemption). You will need to have an acceptable valuation or letter of appraisal. In cases where a letter of appraisal or sworn valuation of a property is expressed as a range, the lowest figure in the value range is accepted as the market value. For example, for a value range between $100,000 and $125,000, then the lowest point ($100,000) is accepted as market value.
     
  8. S0805

    S0805 Well-Known Member

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  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I dont bother looking at the osr publicatuons. Just go straight to the legislation.
     
  10. S0805

    S0805 Well-Known Member

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    Quick update on this. I end up calling SRO and and they've confirmed regardless transfer being monetary or non-monetary value SD exemption applies between spouses. Land transfer form contains the details on where to fill out the monetary value. from tax point of view it is necessary to do monetary transfer otherwise it is considered as gift. also if you do 'monetary transfer' then transfer fees are higher than non-monetary....
     
  11. S0805

    S0805 Well-Known Member

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    @Terry_w , can I please run this idea by you. I am not sure technically it stand up. Lets say I want to pass my ppor to my spouse. spouse goes to lender and borrows money (not necessarily market value, but just outstanding debt on ppor). Once she settles on that loan she pays me that money and I pay off my existing ppor debt. So from tax point of view we can demonstrate the money did exchange. The way I understand is, in legal terms this means 'monetary' transfer. correct me if I'm wrong.

    If I do above, can I select 'Non Monetary' in Land transfer or it has to be 'monetary'. appreciate your thoughts on this.
     
  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Is she paying you money in exchange for the property? Or for something else?
     
  13. S0805

    S0805 Well-Known Member

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    Yes however that money will be used to pay off existing debt against ppor. No extra money is being pocketed by transferor spouse.

    e.g. spouse A owns ppor, which has debt of 100k, 20K, 30K loans against it. spouse B goes to lender and borrows 150K and set up the structure as 100k, 20k, 30k in her name. on settlement spouse B's lender money will be releases and will be used to pay off the debt owned by spouse A.
     
  14. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    That is irrelevant I think - it doesn't matter what the transferee does with the money.

    Hope you are getting legal and tax advice on this.
     
  15. S0805

    S0805 Well-Known Member

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    I've Terry. where I'm concerned is if I'm getting my spouse to borrow money and use that money to pay off my debt. In this way money has been exchanged between parties and this should be considered monetary..... after doing all this. advise I'm getting is select 'non monetary' in land transfer
    My confusion is If I'm exchanging money between spouses and its monetary, why I should select 'non monetary' in transfer of land form.
    In legal terms if money exchanged between spouses isn't it monetary?
     
  16. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I think you are confusing 2 separate transactions.

    1. You are selling the spouse property.

    2. Spouse is gifting you money.

    If you put non monetary on the transfer she is not buying your property and therefore any loan she has use for this will not be deductible.

    Sounds like you are not getting good advice.
     
  17. S0805

    S0805 Well-Known Member

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    Thanks Terry.
    In legal terms am i right in assuming if money gets exchanged between spouses that should be considered as monetary? (i.e. spouse B borrow, settles, money, on settlement this money is paid to spouse A, spouse a pays off the underlying loans, title gets discharged from spouse A name and gets registered in spouse A's name). If it is monetary then i think i should not select 'non-monetary' on transfer of land form.

    reasoning behind this i'm being advised is ,when ato comes knocking spouse A can show the transactions occurred between spouses to prove spouse B in fact borrowed the money to buy the property from spouse A (may not be at market value but for certain amount). what i select in transfer of land has not much bearing as long as i can demonstrate the money being exchanged......
     
  18. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I don't know what the specific definition of 'monetary' is.

    If it means 'consideration' and you are putting 'nil' then the interest on the loan couldn't be deductible. You might be just shuffling money behind the scenes for nothing.
     
  19. S0805

    S0805 Well-Known Member

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    Thanks Terry. much appreciated. It is for consideration. It appears contradicting to me if I shuffle the money between spouses and select 'nil' or 'non-monetary' in land transfer.

    Just in your opinion or if you have seen, from tax point of view which has more bearing to prove the money hasn't been gifted (i.e. deductible).... is it clear evidence that money exchanged between spouses where receiving spouse borrowed money OR consideration details on 'Transfer of land' form.
     
  20. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    There is a presumption that spouse don't contract with each other so you will need at least 3 things
    1. a contract of sale
    2. transfer showing full consideration, and
    3. physical movement of money