Furniture Package Part of Property Sale Price?

From: Jenny F

Hello, first a congrats to the Somers on a very valuable site, software and books - I have been using PIA to review various properties for sale and it is excellent for highlighting the good prospects from the bad. The recent updates have been especially helpful.

Also thanks to the contributors to this forum who share their experiences so willingly.

While using PIA it suddenly occurred to me that purchase of a furniture package as part of the property price means you pay stamp duty on couches and appliances. Which does not sound sensible. I notice that PIA allows you to enter a furniture package separately to the purchase price. Hence my question:

If you were considering an existing furnished property, is it usual to buy the furniture separately to avoid stamp duty being applied to these goods? Eg Asking Price $400,000 - 2 years old - furnished. Assume the furniture is worth about $20,000 in its current condition. Would it be appropriate (ie legal and correct) to state the property sale value as $380,000 and list the furniture separately somehow? Is the furniture actually then a separate contract?

This way stamp duty would be paid on the $380,000 rather than $400,000? Anyone who has any advice (or can point me to where I might find out) as to whether this feasible and importantly, not illegal, would be appreciated.

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Reply: 1
From: Rick Otton

i would show the furniture thrown in free as part of the house deal that you negotiated and if you pay stamp duty so be it as it's only peanuts but what you have done though is finance through a lender the cost of the furniture which is great because it is not being bought using out of pocket cash.
now if your going to rent the house, rent it empty but offer your furniture packet as an extra for say an extra 100 a month
you might even suggest that if they stay their long enough i.e.3-10 years they can keep the stuff for free or take it with them.

or what if you don't want the furniture and your going to live in the house...sell it to cover your stamp duty costs or cover the costs of you moving so give it away to the moving company guys who move your stuff in for nothing

or estate sale prior to settlement with you receiving the proceeds

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Reply: 1.1
From: Jenny F

Thanks Rick, I hadn't considered all of those options...

Another aspect I did not consider in my last post, was that by having the sale listed at the lower price it would increase my future capital gains obligation should I sell - a much larger consideration than stamp duty on purchase!

One thing I did think of was, as you suggested, to rent the property unfurnished and then negotiate the package of furniture as an extra. One property agent I spoke to said to advertise it as both furnished or unfurnished (two different prices of course - perhaps saying furnished negotiable). I would want to concentrate on picking up longer term tenants rather than the short-term market with the higher vacancy. Perhaps a tenant might need some of the stuff and I would only have to remove a few of the items (I am not looking forward to moving fridges and washing machines in and out of the house regularly!). Unfortunately there is not room on the property to store it all there if the tenants arrive with their own.

The agent also commented that on many occasions a tenant inspects a property, looking for it to be unfurnished - they see the furniture, like it, and decide to pay some extra for the furniture anyway.

I am hoping that, if I go ahead with the purchase, that the Dec/Jan timeframe might be the best time to test the market and see what potential there is for renting it fully furnished.

My plan is to get a full Quantity Survey done though, so that the furniture is properly valued for depreciation purposes. My surveyor told me that furniture or inclusions on the contract of sale do not need to be individually valued on the contract itself - the ATO assumes that the items have an inherent value as part of the deal (even if not explicitly stated). The Quantity Surveyor would then value them after the fact and that would be acceptable to the ATO.

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