Panicking re: title transfer/partition

[Danrc]

Hi Somersofters

Recently I had a property held jointly between my sister and I transferred solely into my name through partitioning (I'm in SA): as this was the case no stamp duty was payable.

This was done as my sister has no interest in investing and is currently unemployed: this would make her acting as guarantor on any further loans difficult as I'm keen to keep investing.

No cash changed hands for this deal as it was agreed that I would borrow against the property (after the transfer), pay her 50% of the property value and then continue investing with the rest on my own. Is this possible?

I'm worried at the moment as I feel I may have made a giant mistake, which could cause me great trouble. Definitely my fault for not doing the appropriate research/talking to the right people first

Help!

 

[jrc]

As there is no consideration payable by you to your sister under the partition agreement (otherwise stamp duty would have been payable), the interest on any borrowings by you to enable you to give an amount equivalent to half the value of the property will not be tax deductible as the payment s a 'gift' and not for the purpose of acquiring an investment which will provide assessable income.

In taxation the way you do things is important.

 

[Terry_w]

I am not sure how partitioning works in SA in a situation like this (could you explain?). But, the major consideration is tax. However, just because no cash changed hands at the transfer doesn't necessarily mean the interest on the borrowings isn't deductible.

I think you should seek tax advice asap.

 

[jrc]

Here is a note from SA State Revenue

http://www.revenuesa.sa.gov.au/revnet/helpfiles/partition_land.pdf

 

[Terry_w]

Thanks JRC

I would say interest on the loan could not be deductible if there was no consideration amount on the partition transfer agreement.

 

[Danrc]

Thanks for the responses

Think I've learnt my lesson