Capital Gains Tax

A

Anonymous

Guest
From: Anonymous


My wife and I have a property which we own 50%/50% as joint proprietors. We want to change the ownership to tenants-in-common split 99%/1% so that I can claim the negative gearing against my salary. Does anyone know - will there capital gains tax payable in such a case and if so is there any way to avoid it.
Steve
 
Last edited by a moderator:
W

WebBoard

Guest
Reply: 1
From: Roderick Aguilar


Hi Steve,

I don’t think there is a legal way of getting out of paying the tax. Cost of doing business. Best way is to minimise it. The amount of tax you pay depends on the purchase price. So, logically you should concentrate on the final purchase price. There is something in the law that allows a “favourable purchase” between spouses and relatives. (You should verify this first with your solicitor if it is in place in your State! It was available in NSW as of January 2001 when I bought out my relatives in a property). What this means is that between family and spouses the govt understands that you would not be wanting to charge them the highest market value. You would need to get a very conservative valuation and go on that. Obviously, the lower the purchase price, then the lower the capital gains tax payable as well as the stamp duty will also be considerably less.

Do the normal thing and do the work for the valuer and put down the value you wish to sell your property to your wife for and base it on comparable sales in your area. If you do the work for the valuer, you’ll have a better chance of getting the price you wish than if you had left it to his/her discretion.

But may I add that if you are going to go through all this trouble of transferring to your wife then may I suggest the structure I am using? This is not a legal recommendation, I’m mainly just sharing what I’ve experienced. I have a Trust that owns all of my assets. Nothing goes in my wife’s or my name. But my wife and I are the beneficiaries of this Trust. The good thing about a Trust is that at any given year I can control the distribution of any income. This year I might decide to give 99% to my wife and 1% to me due to my high salary. If things change I could go back to 50/50 or 70/30 split or whatever. The main point being that the structure gives you flexibility to cater for whatever situation arises in the future. You are also allowed to add or remove beneficiaries at any time. So your kids can get involved at a later date if you wish.

To take this concept a little further, you could have a company as a beneficiary of this Trust as well. Because Trusts can’t hold any profits it generates for the year it must distribute it all out to the beneficiaries in that same year. And when you distribute it then you pay tax. But if you distribute 0% to you, 0% to your wife and 100% into a company then effectively you have deferred paying the tax. This is because the company can decide to hold onto the profits of the business by pouring it back into the business instead of handing it out. And if you did decide to distribute the income as dividends then you would only be paying 30% tax.

One final story, I took out the Trust structure mainly for asset protection not for tax minimisation. There was a wealthy individual in the US whose teenage daughter accidentally knocked over a man at a pedestrian crossing in her father’s Mercedes Benz. The man was slightly fazed, nothing serious but when he realised who her father was decided to sue citing psychological trauma after the accident. Needless to say the man suing won and the wealthy individual lost most of his assets. So things in the future may happen that are beyond your control which could cost you your hard-earned wealth. But if the wealthy man’s assets were in a Trust and nothing to his name, then he could have declared bankrupt minimising the affect on his wealth creation structure as the Trust is treated as a separate entity in the eyes of the Law.

All of the above are just part of my experiences and are not recommendations. You should get legal advice as well as talk with your accountant before making any major financial decisions. Whatever you decide, it must be in line with your overall strategy of creating wealth.

Cheers,

Rod Aguilar
 
Last edited by a moderator:
A

Anonymous

Guest
Reply: 1.1
From: Anonymous


Thanks a lot for that Roderick - some realy good info there. I can see that I am going to need a good accountant.
Steve
 
Last edited by a moderator:
Reply: 1.1.1
From: Dale Gatherum-Goss


Hi

A lot of what Rod says is good stuff, however, for CGT purposes, the tax office treat the disposal price as "market Value" not whatever figure you agree upon. Beware of this and you should be fine.

Have fun

Dale
 
Last edited by a moderator:
Top