Direction Needed

[What_to_do]

Hi,

I’m new to this forum but need some general pointers in relation to my below issue:

Issue 1:
My parents transferred a property they had to me in 1999, no money changed hands. Some family circumstances have occurred now as such I wish to hand this property to my sister (no money will change hands). What is the base price to which the property is calculated to considering the transfer will trigger a CGT?

Issue 2:
I brought an investment property about 2 years ago under my name. I am considering placing it into some type of trust (should have undertaken this at time of purchase). I am also looking at renovating this property within the next 2 months. Is it better to renovate now or wait until I transfer the property into a trust?

Thanks

 

[Leikela]

Issue 1:
If you actually transferred the property from your parents name to your name, then wouldn't there would have been stamp duty payable on the market value of the property at the time? I'd use that as your cost base, and same thing when you transfer to your sister so that market value would be your selling price I would have thought. I'm also assuming you never lived in the property during that time, and so you don't get any main residence exemption?

Issue 2:
This really depends on your taxable income and the incomes of the trust beneficiaries and whether the property is negatively or positively geared. I'm assuming it is positively geared, no point putting it into trust (unless there are other factors) to earn losses. If you can get away with calling some of these renovations as repairs & maintenance which would result in a loss and you have high taxable income and would benefit then do it while it's in your name, but it's really difficult to advise without knowing all the facts.

 

[LudaKris]

If you can get away with calling some of these renovations as repairs & maintenance

Please don't do this. This is a red flag item for the ATO and you are asking for an audit.


In regards to transferring across into a trust, you have to weigh up the stamp duty on transfer against the potential tax savings of distributing rental income to lower taxable income beneficiaries (assuming it is positively geared).

It is much of a muchness in regards to when you do it from a CGT perspective, but from a stamp duty perspective it is a lot better to transfer a lower market value (i.e. pre-reno).

Also ensure you get a quality trust deed for your trust and use a corporate trustee for future flexibility etc