dodgy or not?

[newless2]

If I have two houses next to each other and I rent one out and live in the other and sold them both to a developer, can I agree with the developer to sell the one I live at an artificially higher price and the one I rent at an artificially lower price? Obviously my intent is to reduce capital gains as I assume the sale of my own home is CGT free. How dodgy is this, can I determine the sale prices as if they are independent properties and therefore nothing can be said or does the fact that it is a linked transaction mean this is pretty dodgy (evasion)?

Thanks,
newless

 

[Ocean Architect]

If you lie, then of course it's dodgy (read: illegal and the ATO will use you as a piniata if they find out) but at the same time, if your PPOR is newly painted/nicer/landscaped/can rent for more etc and you can rightly justify a higher price, then it's fine. It's also pretty common for side by side land to sell at a higher price combined than each individually because combining the land for development or using one for land banking purposes is attractive to developers

 

[Aaron Sice]

if your intent is to avoid/evade taxation, then yes, it is illegal.

if your intent is to minimise taxation payable, then the ATO will see that as legal.

worse case scenario, ring the ATO and ask - you can do it anonymously.

 

[marg4000]

Dodgy.

The real risk you run is that both properties may not settle. An unscrupulous buyer could settle on the cheaper property but not on the artificially higher priced one. Do you have the $$$ for a lengthy court battle?

Stamp duty would be payable on the actual value of each property, which is where you could come unstuck. Capital gains tax is also levied on the value of the property if it is sold in the circumstances you mention. In both cases you sign documents relating to the value of the propery sold.

Expect an ATO audit - Government departments share information.

Obviously a small discrepancy should escape attention.
Marg

 

[boods99]

Stamp duty would be payable on the actual value of each property, which is where you could come unstuck.

You may find that in this scenario, (in WA at least) the OSR could assess the land value as being that of both properties combined, thus charging the buyer a larger amount to that if it were two separate properties, assuming the combined total moves into the next price bracket. Stamp duty is charged on a sliding scale so the higher the value of the property, the larger percentage stamp duty you will pay.

To avoid the larger assessed amount, the onus is on the purchaser to prove that the purchase of one of the properties was not dependant on the purchase of the other.

Easy to do via a stat dec, however, should you amalgamate them in the future as part of a development, and the OSR find out (and they have a habit of doing so ) then you might find yourself in a little spot of bother.

The OP's question is about capital gains tax, and in this respect, there is nothing stopping you from selling the PPOR for a higher amount. The issue here, is the use of the word "artificially" which would suggest an attempt at tax avoidance.

I would be very careful.

Boods