Costs of Converting 50/50 owned IP to one name?

[Milan]

Hi,

I have a question regarding converting an old PPOR that my wife and I have 50/50 ownership in. This property has been an IP tenanted now for 7 months ($500pw). We considered selling it to fund the purchase of a new PPOR but interest has been low.

The house is in Queensland and is valued presently around low 600k (my estimate and bear in mind no real interest at selling in this price range). It is in Ashgrove on a 700 sqm block. We bought the house in early 2005 for high 300s.

My new thoughts are to hold on to it as an IP but as my wife is not working, it makes sense to convert it to 100% my name.

I am aware of Stamp Duty costs of doing this but am unsure of the calculation of such, or other costs that may be involved (legals etc).

Also I am aware of the 6 year CGT exempt rule but am unsure of wheter I need to get a new valuation done now (or really 7 months ago) or at the end of the 6 year period, (or if we buy another PPOR meantime) in case we sell it later. We are currently renting.

Also does anyone have a simple return of investment formula they apply to test if the excercise is worthwhile at all?

Many Thanks.

M

 

[Terryw]

If you or your wife are not claiming another property as the main residence, she may be able to claim the CGT exemption .

You will have stamp duty on the share transferred - I think it is higher in QLD for investments too.

Also legals on the conveyancing.

 

[asdf]

File for divorce and the transfer will be free under the consent orders. What you do afterwards in Vegas should be none of OSR's business... have fun!!

 

[morg]

I'm in a similar situation, ie. converting ppor into ip, however property is 100% owned by wife. We diligently paid the loan down over 5 years without the benefit of an offset account, so we are now holding an ip with nil debt.
After looking at the numbers found it better to leave in wife's name as she will have no other taxable income. After expenses such as rates, insurance, land tax etc and claiming the first $6K exemption, there will be very little tax to pay, so not really worth the added costs to change ownership.
With all that equity available it will allows us to increase our holdings in her name and spread the land tax liability.
So, for us, it does has some advantages keeping it in wifes name.

 

[Modal Harmony]

Hi Milan, a quick online check on Yahoo Finance for a $630k (say) loan for QLD as IP with no loan outstanding yields $22,700!! Are you sure you want to proceed??

Loan calculator link:
http://au.pfinance.yahoo.com/calculators/stamp-duty.html

 

[josko]

Hi there,

Your wife may be able to gift you her 50% by way of a minute agreement or the like.

I advise you speak to your accountant about this.

Regards JO

 

[Milan]

Hi

Thanks for the replys - particularly asdf. You might have something there.

We still have about $460k outstanding on the loan and am also looking at concerting that P and I loan to interest only. As for the stamp duty, do the OSR consider the total value or just the Capital Gain since bought in their calculation.

Am meeting with my accountant soon for tax so will thoroughly check it out then.

Cheers
M

 

[Terryw]

The OSR levies stamp duty on the value of the property transferred.

And remember you are only transferring 50% of the property.

 

[Milan]

OK so probably gone off the idea of converting the property to my ownership now due to the high cost of stamp duty. Thought rather hopefully that being a spousal transfer that it may somehow be exempt - so much for the idea of a gift. But still unsure of the valuation issue.

Will I need a valuation to officially show the capital gain the property realises as an investment post PPOR when (if) I sell in the future? If so any recommendations in the Brisbane area?

Cheers
M