Investment Property - Tenants in Common Split - CGT

[paulz]

HI

I'm looking at the benefits of Tenant in Common split with my wife (99%/1%) and then in say 15-20 years altering it to (1%/99%)..

Why? to reduce the overall CGT payable if we hold the property for 25 years.

For the next 20 years- I shall use it for Negative Gearing benefits, then upon retirement - transfer to wife ..

I know this will trigger CGT event - but I have calculated CGT then and again in a further 10 years and it's less than if i was to hold for full-term (30 years).

THere's no stamp duty.. only the legal fees involved at the 20 year mark.

Asumming , 3% property growth on a $660K property - you could be saving $20K or more.. dependant upon tax rates.

Anyone have any thoughts -

Obviously , alot can change in 20 years..

 

[Terry_w]

I don't like this 1% biz.

It will mean both are on the loan - so poor asset protection and this will hurt serviceability severely. The 1% owner will only didly squat yet be liable for the whole debt. Messy at death too.

Why not just got 100%? If you are worried about control, lodge a caveat.

 

[paulz]

Not worried about control or asset protection...

Simply, trying to save minimize Capital gains for the future..

However, if there's benefits then ok.. 100% ownership to me.. and i'll enjoy the negative gearing and pay CGT in 20 years.

 

[Terry_w]

Yes best to go 100%. CGT will only be slightly higher than trasnferring 99%. Stamp duty exempt in Vic anyway.

 

[Terry_w]

Another option is the fixed unit trust. CGT could be minimised by transferring say 10% per year for 10 years. Could also transfer units to a SMSF to make a tax rate of possibly 0%.

 

[marg4000]

Wouldn't transferring ownership trigger a CGT event?
Marg

 

[Terry_w]

Wouldn't transferring ownership trigger a CGT event?
Marg

Yes it would. but a 10% transfer would be smaller and more easily managed to reduce CGT.

 

[paulz]

I don't think i have time to setup a Fixed Unit Trust in 45 day settlement.. plus there must be a downside in Unit trust...

impact on me negative gearing ?.. loan application ..

maybe the next purchase - will be ready for this.. I need to find someone knowledge like Terry - to plan structure of next purchase..

 

[marg4000]

Yes it would. but a 10% transfer would be smaller and more easily managed to reduce CGT.

Sorry Terry, should have said that I was referring to the first post on this thread.
Marg

 

[Terry_w]

I don't think i have time to setup a Fixed Unit Trust in 45 day settlement.. plus there must be a downside in Unit trust...

impact on me negative gearing ?.. loan application ..

maybe the next purchase - will be ready for this.. I need to find someone knowledge like Terry - to plan structure of next purchase..

If you have already exchanged then it would be basically too late.

It is possible to negative gear against personal income with a unit trust. Downside is less lenders.