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

Discussion in 'Accounting & Tax' started by Terry_w, 26th Oct, 2015.

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  1. hydroboy

    hydroboy Member

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    Ok, my rational was it might allow you to put your offset against your non deductible debt portion or increase payments to your non deductible debt portion.
     
  2. Terry_w

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

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    If you have deductible and non-deductible use you should split.
     
  3. Terry_w

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

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    btw, why would you have a mixed loan on a spousal sale?
     
  4. hydroboy

    hydroboy Member

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    As per your quote above. Assume scenario 2. Spousal transfer complete and spouse A has a loan of 400k remaining with 50% deductable. Suppose spouse A makes an additional payment of 100k on loan, how would that be apportioned between deductable and non deductable portions?
     
  5. Terry_w

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

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    Usually when selling an asset the loan is paid off. $200k of the loan would be paid off in this situation. If you want to borrow extra to invest it would be best to do that as an additional split
     
  6. Tom_21

    Tom_21 New Member

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    Hi Terry, thank you for the information provided.

    I believe my wife and I would fall under the above category to be exempt from transfer duty, however, someone mentioned to us we wouldn't be eligible for this exemption because we were already married when the property was first acquired by only one party and this exemption would only apply if one party already owned the property before the relationship. I can't find anything about this in the legislation. Do you know anything about this? Any help is much appreciated.

    Tom
     
  7. Paul@PAS

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

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    I have never heard this. It is commonly used on remarriage, when two people have owned homes individually and marry but on each occasion the rule is limited to being used as their PPOR at the time of the transfer. The sole test is at the time of the transfer. There is a limitation for defactos which applies a 2 year conditional test in s104B1(e). This is a anti avoidance rule to remove all doubt as to partners who are not married and aligns with the family law understanding of a defacto relationship. In theory they could marry in a registry to bypass that limit.

    The 2 years limit was bought to my attention by a same sex couple who encountered difficulties withy the law.. They had to wait 6 months or marry according to their solicitor.

    DUTIES ACT 1997 - SECT 104B Exemption--transfer of residential land
     
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  8. Terry_w

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

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    I bet it wasn't a lawyer that told you that.
     
  9. Tom_21

    Tom_21 New Member

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    Thank you for the quick responses. It was actually our conveyancer who said that.... that's why I got worried.

    We are in a marriage, one partner is citizen, the other isn't. We are planning to buy land and build a home in the name of the citizen only (for HomeBuilder Grant eligibility) and transfer the property into both our names later on.
     
  10. Terry_w

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

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    best to take legal advice from a lawyer.
    Have a read of the legislation first
     
  11. Tom_21

    Tom_21 New Member

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    What am I missing?
     
  12. Paul@PAS

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

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    Foreign Investment review board issues if you split up ?
    Loan finance ?
    What are the conditions of the duty concession ?
    Foreign person land tax surcharge later on ?

    A lawyer attends university and undertakes post grad qualifications and experience to be admitted
    A conveyancer doesnt.
    Its often wise to see a solicitor and they dont cost more and some focus solely on property law etc. Many problems uccur when a conveyancer is our of their depth and dont refers to person back to a solcitior. It may pay to deal with one from the start.

    Tip : Solicitors trust accounts are insured. Conveyancers are not.
     
    Last edited: 27th Oct, 2020
  13. Tom_21

    Tom_21 New Member

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    Thank you for the advice and taking the time to respond
     
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  14. Humphrey

    Humphrey Well-Known Member

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    Question for @Terry_w.

    Does PPOR refer to physically living in the premises, or can it include properties that were lived in, but were subsequently rented out (became IP) less than 6 years ago? Does the 6-year window apply here?
     
  15. Terry_w

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

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    Depends on what in relation to. There is a 6 year rule for land tax, if unrented.
    But if you want to transfer title and get the duty exemption it has to be the PPOR at the time of the transfer.
     
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  16. Paul@PAS

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

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    PPOR refers to land tax. Then there is the main residence rule for CGT. The 6 year absence rule is a Commonwealth tax law that concerns CGT (perhaps). The NSW state law also has a 6 year rule where rent is NOT earned and the occupants are absent and not residing in another property they own (eg overseas rented property) and the prioperty is either not rented or nominal rent is paid to cover limited costs by a relative etc. . You may be confusing two different tax issues

    See advice for clarity as you should consider both sets of laws that are nothing alike
     
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  17. Humphrey

    Humphrey Well-Known Member

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    This is the part that I wasn't aware of in relation to NSW transfer duty. So it's quite clear to me now that NSW transfer duty is payable if renting out the accommodation as long-term IP, even if the lease started yesterday.

    I should have provided more info. Query was about transferring asset held in my name only to both our names.

    In regards to CGT, my reading of both the above comments if such a transfer/sale took place more than 6 years after renting out the property, then CGT would also be payable.
     
  18. Terry_w

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

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    This is phrased badly.
    If a transfer occurred more than 6 years after renting a former main residence out the main residence exemption might not be able to apply in full.
     
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  19. Paul@PAS

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

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    And its also possible that during the 6 years there may be no capacity to use the 6 year absence rule in full, or even part.
    I often discuss the absence rule and note clients where it doesnt even apply. Its not an automatic right just because you were absent.
     
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  20. Terry_w

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

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    And the 6 year rule may not be able to be used at all if another property had been claimed as the main residence by the spouse, or minor child of the taxpayer.