is this legal?

Hi,

I have heard conflicting advice on the follwoing scenario

Friends of mine want to transfer a property (under love and affection rule) which was owned by the male partner as his PPR and then subsequently has let it out after moving in with female.

They want to transfer the IP into the females name at its current value of $350k and she is going to take a 100% loan against the property and claim full tax deductions. The male only owes $200K on it so will therefore receive $150K cash.

He intends to put the $150K cash into the mortgage of his new PPR - BUT this home and the mortgage belongs to the female partner.

Is this allowed? It realy seems to good to be true and if it were allowed wouldnt we all be able to pay off our PPR within 4 years by doing same?

Thanks for your advice and help - tax ruling would be helpful some accountanst saying yes some saying no
 
Assuming I'm reading that correctly (it's a tad confusing), there's two other factors you haven't considered yet as well.

1) You would have to pay stamp duty on the transfer

2) As "the male" has rented out the property he will be liable for some CGT on the transfer. (It counts as a disposal)

I don't see how this type of transaction would pay off the property though :S

Property owned by male - $200k mortgage
Transfer to female for $350k (100% mortgage being $350k)
Male therefore has $150k in cash which he puts onto house
Now there's a $200k mortgage again.
 
There's no stamp duty in Victoria on a transfer between spouses.

From the limited facts you present, the husband may be able to claim the 6 year CGT exemption on his PPR, so he may have no CGT liability.

The only question would be if the ATO challenged the whole transfer as being just to reduce tax, ie tax reduction was the dominant reason for the transfers. That might then catch it under IVA, but you'd really need to get professional advice on that point before proceeding.
 
There's no stamp duty in Victoria on a transfer between spouses.
Cool. Learnt something new.

From the limited facts you present, the husband may be able to claim the 6 year CGT exemption on his PPR, so he may have no CGT liability.
While he would be able to do this, unfortunately, for the main residence exemption spouses are "sort of" assumed to be one person. That is, if spouses nominate different PPORs, they each only get 50% of the exemption for that time (cause only 1/2 of "the person" has nominated it :S ) I think it also doesn't even matter who owns the residences.

So if The Male claims the exemption on his PPOR during the time he's living with the female, The Female will lose a part of her exemption when she sells. Bit of a toss up.

The only question would be if the ATO challenged the whole transfer as being just to reduce tax, ie tax reduction was the dominant reason for the transfers. That might then catch it under IVA, but you'd really need to get professional advice on that point before proceeding.
I think there is a high possibility of this but as Jonathon said; professional advice = the win.
 
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