Does stamp duty apply for selling a property to spouse? VIC

Hi all. I have gone through old threads in this forum and can't seem to be able to find a straight answer.
Scenario: Need to convert PPOR (my own name) to Investment Property. Value $450k. Loan $250k. I am thinking to sell/transfer it to wife on market value and re-gear the property to 90% (ie $405k) and use the funds towards our new property. Will this exercise attract stamp duty in VIC?
 
Hello Imbi

If you 'sell' then it is a transaction like any other

However, the Stamps Act allows for the transfer of real property between spouses as an act of Love & Devotion. The Transfer is exempt from Stamp and, as I understand it, from Transfer Duty but you pay the usual administrative government transaction fees and charges.

When the property is eventually disposed of, this may trigger a capital gains tax event, but not until that disposal

Back in 2006 I affected 3 x Matrimonial Transfer to bring Mike onto the titles of properties I had previously held as Sole Proprietor. Two of these properties were sold in the 2013 Tax Year but it was not until then that the Capital Gains was calculated and tax due from each of us on the (very small) increase since the date of transfer, and tax also due from me on the (slightly larger) increase in value since purchase in 2002. Adjusted for the usual 50% reduction in the capital gain before the application of tax.

So transfer away but you can't have it both ways: A sale is a sale but a transfer is a transaction of a whole different colour!

Hope this helps, and don't forget there are free and mighty resources available to you on www.sro.vic.gov.au and on www.ato.gov.au.

Cheers
Kristine
 
Kristine, this is incorrect on both accounts. CGT would be on market value for a gift too at the date of transfer, however if it is a main residence the exemption may apply.

If you transfer for no consideration there will be no possibility of claiming interest - borrowing money to receive a gift doesn't work.

You will need to sell at full market value.

relevant law is s43(3) Duties act. recently amended, but still apears to be no duty chargeable from transfers between spouses for property located in vic.

Why would wife limit the loan to 90%, why not 100% plus costs?
 
Hello Terry

Not sure what I am incorrect with

If a Principal Place of Residence is disposed of, in any way, the sale or disposal would usually be exempt from Capital Gains tax

In my experience, as I described, I brought my spouse into the ownership of a property.

My CPA advised me that the history of the property and this transaction would not be assessed for Capital Gain until the property was fully disposed of. And that is what happened.

The error in my reply seems to be that I introduced the subject of tax on Capital Gains whereas imbi was asking whether the scenario as proposed by him would attract stamp duty in Victoria

The subject of financing the transaction is a separate one and I did not address that

I should have stuck with answering the stamp duty question and thereby avoiding the chastisement for relating a factual capital gains tax story of my own.

Lotsa love
Kristine
 
Sorry I didn't mean the above to sounds like a chastisement.

Transferring title is a CGT event. It just happens that you were able to apply an exemption now for your sale.

If the property was an investment then you would have had to pay CGT now and your husband would have had to pay 2 different CGTs on his eventual sale. He would have 2 interests in the property, 1 from the begining and the other from the date of the purchase.
 
Thanks for the reply guys

Terry, so if I am going to transfer the property based on natural love and affection (hence no stamp duty), then maximum wife can claim is the current outstanding balance of $250k. Is this right?

The other option is to transfer the property to wife with a consideration amount of $450k which is the market value but then it will attract stamp duty
 
Thanks for the reply guys

Terry, so if I am going to transfer the property based on natural love and affection (hence no stamp duty), then maximum wife can claim is the current outstanding balance of $250k. Is this right?

The other option is to transfer the property to wife with a consideration amount of $450k which is the market value but then it will attract stamp duty

I don't know where people get the 'love and affection bit" but no love or affection is needed.

If you transfer a VIC property to a spouse there is no stamp duty - whether gifting or selling at full market value.
 
Terry, so if I am going to transfer the property based on natural love and affection (hence no stamp duty), then maximum wife can claim is the current outstanding balance of $250k. Is this right?

No this is not right.

Your existing loan is $250k. Assuming you own 50/50 then your wife's share of this would be $125k. So the maximum loan that relates to your wife purchasing the property would be $125k. If you or her have ever redrawn money this would be lower.

If a gift the max interest deductible would be based on $125k. but could be lower.

Seek legal and tax advice before doing this.
 
If you transfer a VIC property to a spouse there is no stamp duty - whether gifting or selling at full market value.

Hi Terry
Thanks for your patience with me. The property is currently in my name only. So, if I sell the property to my wife for $450k and she raises $405k (90%) to purchase it. Does it mean all of the $405k is tax deductible and I don't have to pay stamp duty?
 
Hi Terry
Thanks for your patience with me. The property is currently in my name only. So, if I sell the property to my wife for $450k and she raises $405k (90%) to purchase it. Does it mean all of the $405k is tax deductible and I don't have to pay stamp duty?

Possibly - the interest part may be deductible. depending how it is structured. Why wouldn't she borrow say $455k?
 
Possibly - the interest part may be deductible. depending how it is structured. Why wouldn't she borrow say $455k?

She could, however it would mean the property will be negatively geared. Our preference is to make it breakeven. Need to do sums on this
 
She could, however it would mean the property will be negatively geared. Our preference is to make it breakeven. Need to do sums on this

This must mean you have no non-deductible debt? If this is the case why do you want to transfer?
 
I might have to do something similar....just so i get this right transfer and sale of property is the same thing for above discussion.
stamp duty is excluded in both scenarios....capital gain tax is excluded as well given if its PPOR, but it applies if its IP (to the original owner)....

How about If PPOR was going to be IP....transfer/sale it to spouse (no CGT & stamp duty). Once spouse takes it over change it to IP and start claiming interest..
can it work?
 
A transfer is a change in ownership. It might be a sale or a gift.

A transfer results in a CGT event. CGT will be calculated at market value whether a sale or a gift. An exemption may apply if the house was always a main residence.

A transfer will result in stamp duty at market rates too - whether a gift or a sale. However in VIC when one spouse transfers to another there is an exemption.
 
Thanks Terry.....how about the second query

How about If PPOR was going to be IP down the track....transfer/sale it to spouse while it is PPOR (no CGT & stamp duty will occur). Once spouse takes it over change it to IP and start claiming interest....can it work?
 
Thanks Terry.....how about the second query

How about If PPOR was going to be IP down the track....transfer/sale it to spouse while it is PPOR (no CGT & stamp duty will occur). Once spouse takes it over change it to IP and start claiming interest....can it work?

Yes it could work. Dont transfer too early as it will keep growing in value and that could lead to more cash released and higher deductions
 
Terry, when trying to transfer/sale full ownership of PPOR from one partner to the other what happens to the other loans that has been borrowed against PPOR. E.g. PPOR is in my name but i've borrowed equity from PPOR and set it up as separate loan to invest...if i transfer my PPOR to spouse then i guess i also have to transfer this additional loan (borrowed equity) which is secured against PPOR to my spouse. if this is the case then i'll loose tax deductibility of this additional loan (borrowed equity).

And i would assume when you transfer PPOR to spouse, lender will do full credit check and advise if they are OK
with that....
 
Yes this will be a change in ownership so any loans will have to be discharged. This will need careful planning as you do not want to pay back investment loans. But you should be able to substitute security. One loan will increase but another loan should decrease by almost the same amount.

New loans will need to be applied for too for the purchaser.
 
Sorry for the bump but does the same rule apply in NSW? Our ppor is under my name only but i want to "gift" or transfer it to be in my wifes name only. Would we be liable for stamp duty? The property has always been a ppor but we are thinking of turning it into an ip in a couple of years if we leave it under my name we will be up for 5k or 6k extra per year in land tax but if it is in her name she is still well under the threshold.
 
Sorry for the bump but does the same rule apply in NSW? Our ppor is under my name only but i want to "gift" or transfer it to be in my wifes name only. Would we be liable for stamp duty? The property has always been a ppor but we are thinking of turning it into an ip in a couple of years if we leave it under my name we will be up for 5k or 6k extra per year in land tax but if it is in her name she is still well under the threshold.

Different laws in NSW. This would attract full duty.

No point in gifting it as any loan interest would not be deductible.
 
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