Lets say you are tenants in common A 50% B 50%. And you want to change this to A- 75% and B- 25%. What do you need to do (free title no finance)? What about CGT?
Changing % of tenants in common
- Thread starter always_learning
- Start date
G'day Always
Where is it written who owns what share?
Unless there is some sort of written documention, it is decided between the owners.
Therefore, change the balance of ownership as you agree between you.
Cheers
Kristine
Where is it written who owns what share?
Unless there is some sort of written documention, it is decided between the owners.
Therefore, change the balance of ownership as you agree between you.
Cheers
Kristine
This could be a very interesting topic from a retirement point of view, and I would love some of the legal/tax experts to offer an opinion.
For example, If you sold 25% of a property each year for 4 consecutive years, How would stamp duty work out?? Your cap gains tax could be greatly minimised, while you help your adult children get a start in IP's.
Thoughts please!!
bye
For example, If you sold 25% of a property each year for 4 consecutive years, How would stamp duty work out?? Your cap gains tax could be greatly minimised, while you help your adult children get a start in IP's.
Thoughts please!!
bye
Bill
How can you 'sell' part of a property?
My understanding of 'buying' and 'selling' is the date on which the contract was entered into.
From a tax point of view, you 'bring to account' on these dates, even if you don't receive the money until the next financial year.
So if you bought (signed a contract note) a property on 1st June, 2002, you would be liable for full capital gains tax assessment if you sign a contract to sell it before 2nd June, 2003, even if, say, settlement was not to occur until September, 2003.
But in so far as declaring the income from a property, the owners can decide who gets what.
However, if you bought a property in partnership under a 'joint tenant' arrangement with another person or persons, each person is issued with a separate Certificate of Title which states the apportioned but undivided share of the property.
(This means 50/50, not that one person owns the doors, another the windows etc)
So in this instance the proportion of ownership is decided at time of purchase and the entitlements would have to be 'sold' or transfered between the owners because new title documents would have to be issued.
'Common' means there is only one Certificate of Title and you hold general ownership with the proportions at the owners' discretion.
Any sale between owners is subject to stamp duty and would also be subject to capital gains tax if the property was bought since 1985.
Hhhhmmm. On the subject of 'helpng adult children'. ... Bill, you must be a far more indulgent parent than I am. I 'help' my teenage children by igniting a giant penny bunger under them when they turn 15, immediately cut off their allowance, frog march them to the local supermarket for a job and then on to the bank for a 'progress saver account'. The eldest bought an apartment off the plan when he was 16 & half, the second child was a little slower, buying a townhouse in January this year at 18 years 4 months, and the youngest is now steadily saving although he has been hampered with chronic fatigue for a few years, and has only been working for the past six weeks.
As I intend to live to 91 they had better not put any faith into getting an inheritance from me. They have already got it in the form of private school education, and living 'at home' with free bed and board. They are lovely children, prepared to take responsibility for themselves and their own financial future.
Bill, teach them how to invest. Believe me, you can't do it for them.
Cheers
Kristine
Oh, and keep your hard earned assets for when you're 64!
How can you 'sell' part of a property?
My understanding of 'buying' and 'selling' is the date on which the contract was entered into.
From a tax point of view, you 'bring to account' on these dates, even if you don't receive the money until the next financial year.
So if you bought (signed a contract note) a property on 1st June, 2002, you would be liable for full capital gains tax assessment if you sign a contract to sell it before 2nd June, 2003, even if, say, settlement was not to occur until September, 2003.
But in so far as declaring the income from a property, the owners can decide who gets what.
However, if you bought a property in partnership under a 'joint tenant' arrangement with another person or persons, each person is issued with a separate Certificate of Title which states the apportioned but undivided share of the property.
(This means 50/50, not that one person owns the doors, another the windows etc)
So in this instance the proportion of ownership is decided at time of purchase and the entitlements would have to be 'sold' or transfered between the owners because new title documents would have to be issued.
'Common' means there is only one Certificate of Title and you hold general ownership with the proportions at the owners' discretion.
Any sale between owners is subject to stamp duty and would also be subject to capital gains tax if the property was bought since 1985.
Hhhhmmm. On the subject of 'helpng adult children'. ... Bill, you must be a far more indulgent parent than I am. I 'help' my teenage children by igniting a giant penny bunger under them when they turn 15, immediately cut off their allowance, frog march them to the local supermarket for a job and then on to the bank for a 'progress saver account'. The eldest bought an apartment off the plan when he was 16 & half, the second child was a little slower, buying a townhouse in January this year at 18 years 4 months, and the youngest is now steadily saving although he has been hampered with chronic fatigue for a few years, and has only been working for the past six weeks.
As I intend to live to 91 they had better not put any faith into getting an inheritance from me. They have already got it in the form of private school education, and living 'at home' with free bed and board. They are lovely children, prepared to take responsibility for themselves and their own financial future.
Bill, teach them how to invest. Believe me, you can't do it for them.
Cheers
Kristine
Oh, and keep your hard earned assets for when you're 64!
Hi Kristine,
I know it's late and maybe I'm not thinking clearly
However the thought that I had was along the lines of selling a part of a property, gaining CGT benefits, and helping(not by giving) a young relative(maybe grand children when I'm 64).
For instance assume I have a cap gain of $200,000 in a property and a clear title. If I sell and have structured my income for the year to be near zero, then I pay CGT on 50% or $100,000. This will relate to $40,000 being payed at the top marginal rate of 48.5%(including medicare).
However if I sold 25% of the property(IF POSSIBLE) then CGT would only be 50% of $50,000 or $25,000 and at much lower marginal rate.
The questions raised are about how much stamp duty is payable and therefore if it is worthwhile. Maybe by having some type of formalised partnership agreement, lodged with the tax office, and changed each year would be possible.
I am doing a bit of thinking aloud here.
good night.
I know it's late and maybe I'm not thinking clearly
However the thought that I had was along the lines of selling a part of a property, gaining CGT benefits, and helping(not by giving) a young relative(maybe grand children when I'm 64).
For instance assume I have a cap gain of $200,000 in a property and a clear title. If I sell and have structured my income for the year to be near zero, then I pay CGT on 50% or $100,000. This will relate to $40,000 being payed at the top marginal rate of 48.5%(including medicare).
However if I sold 25% of the property(IF POSSIBLE) then CGT would only be 50% of $50,000 or $25,000 and at much lower marginal rate.
The questions raised are about how much stamp duty is payable and therefore if it is worthwhile. Maybe by having some type of formalised partnership agreement, lodged with the tax office, and changed each year would be possible.
I am doing a bit of thinking aloud here.
good night.
Yes it is written on the certificate of title. A- 50% B-50%!
Originally posted by Bill.L
Hi Kristine,
I know it's late and maybe I'm not thinking clearly
Yes, it was late, wasn't it? What were we doing up at 3am? I was still buzzing about the Melbourne meeting and GoAnna's amazing project!!
However the thought that I had was along the lines of selling a part of a property, gaining CGT benefits, and helping(not by giving) a young relative(maybe grand children when I'm 64).
For instance assume I have a cap gain of $200,000 in a property and a clear title. If I sell and have structured my income for the year to be near zero, then I pay CGT on 50% or $100,000. This will relate to $40,000 being payed at the top marginal rate of 48.5%(including medicare).
However if I sold 25% of the property(IF POSSIBLE) then CGT would only be 50% of $50,000 or $25,000 and at much lower marginal rate.
Don't forget that capital gains is reduced by half if you have the asset more than twelve months.
Also, the highest tax bracket doesn't apply until you exceed $60,001 in assessable income in any given tax year. So yes, if you already earn a taxable income of $60,000 then anything extra in that year would be taxed eg capital gain of $100,000 reduced by 50% to $50,000 would mean CGT of $24,250 approx.
But if you have no other taxable income for that year, then tax on $50,000 would be as per this table (ATO website):
Tax rates 2001-02 and 2002-03
Taxable income Tax on this income
$0 - $6000 Nil
$6001 - $20 000 17c for each $1 over $6000
$20 001 - $50 000 $2380 plus 30c for each $1 over $20 000
$50 001 - $60 000 $11 380 plus 42c for each $1 over $50 000
Over $60 000 $15 580 plus 47c for each $1 over $60 000
The questions raised are about how much stamp duty is payable and therefore if it is worthwhile. Maybe by having some type of formalised partnership agreement, lodged with the tax office, and changed each year would be possible.
Any transfer of property attracts stamp duty at valuation. Once upon a time people could 'sell' property for $1.00, but nowadays I believe it has to be 'fair market value' for the purposes of tax and stamp duties even if the property changed hands for no actual money.
Even 'gifts' of property are levied stamp duties.
I am doing a bit of thinking aloud here.
Always good to do that. Hope I didn't sound crabby - must be lack of sleep!
good night.
Hi Kristine,
I forgive crabbiness I'm just sorry that I couldn't be there last night. Been 6 months since I went to the Melb get together.
In regard to the stamp duty, If I sold 25% of a $400,000 property, wouldn't the purchaser only pay SD on $100,000, and over a 4 year period(for the full transfer) there would be savings in SD as well as CGT.
If something like this is possible it begs the question, Why hasn't someone thought of it before and is it a loophole the gov would close siting tax avoidance?? Tax/legal experts please help.
bye
I forgive crabbiness
I'm just sorry that I couldn't be there last night. Been 6 months since I went to the Melb get together.In regard to the stamp duty, If I sold 25% of a $400,000 property, wouldn't the purchaser only pay SD on $100,000, and over a 4 year period(for the full transfer) there would be savings in SD as well as CGT.
If something like this is possible it begs the question, Why hasn't someone thought of it before and is it a loophole the gov would close siting tax avoidance?? Tax/legal experts please help.
bye
I'm pretty sure stamp duty is only payable on the proportion of the property that changes hands.
I had the reverse situation when I broke up with my partner a few years ago.
We had two properties. One is my current PPOR and the other was a house in a country town. We owned both jointly (Tenants in Common). We decided that she was to get the country house that she then adopted as her PPOR (which had no finance owing, but was of a relatively low value) and I was to get the house that I now live in, as well as the mortgage.
For tax purposes I had to pay stamp duty on 50% of the houses value and she had to pay CGT on the same 50%.
She had to pay stamp duty on 50% of the property she acquired and I had to pay 50% of the CGT (which was nothing in this case).
I had the reverse situation when I broke up with my partner a few years ago.
We had two properties. One is my current PPOR and the other was a house in a country town. We owned both jointly (Tenants in Common). We decided that she was to get the country house that she then adopted as her PPOR (which had no finance owing, but was of a relatively low value) and I was to get the house that I now live in, as well as the mortgage.
For tax purposes I had to pay stamp duty on 50% of the houses value and she had to pay CGT on the same 50%.
She had to pay stamp duty on 50% of the property she acquired and I had to pay 50% of the CGT (which was nothing in this case).
There will be a transfer form that needs to be filled out. Stamp duty payable unless exempt and CGT payable. Both on the market value of the share transferred.
Loans would need to be redone.
Consider the deductibility of interest side as well. If A is not borrowing to buy B's share then the loan will not be deductible in full.
