Purchasing V/Land for $1 & ATO & Stamp Duty

[windsor]

Three Questions.

1) If I was to purchase V/Land at $1 from a friend and the real market value of that land is $300,000 what are, or if any tax implications on myself for purchasing the V/Land at $1 and stamp duty ??

2) If I sell V/Land to a friend for $1 and the real market value of the land is estimated to be worth $300,000 what Tax implications may I face from the ATO ??

3) If I was to sign over V/Land to a friend what are, or if any tax implications that I myself may face from the ATO for signing and changing the title of the V/Land that’s worth $300,000 at no cost to the purchaser ??

 

[Celeste]

Hi Windsor

When I was doing the reading for conveyancing. I read you can transfer land for love!! so to speak but stamp duty will be done on a certain value, Now I can not remember what one it said market or unimproved via rates etc.

If I have time tonight I will see if I can find it. but its for WA

As for tax I would think they have that wrapped up and they would not allow you to account for it that way. and you could be charged with tax evasion.

 

[grossreal]

hi windsor
you need to get a valuer to value the land for stamp and gst purposes and thats the figure that you transfer the land for here in nsw.

the monitary value is not the issue the value is.
you do the same if you are transfering a portion of a property.
so if you are paying out a partner for 1.00 the transfer figure for stamp duty is done from a valuation.
just done one within the last 6 months and thats the process here in nsw and if you did it this way it would be the same for all states.
this also gives you a start for gst as you will need this if every you developed or sold.
usually when a person is going into a jv and they are throwing the land into the deal you need to work out a value so I use this method.

 

[Simon]

hi windsor
you need to get a valuer to value the land for stamp and gst purposes and thats the figure that you transfer the land for here in nsw.

the monitary value is not the issue the value is.
you do the same if you are transfering a portion of a property.
so if you are paying out a partner for 1.00 the transfer figure for stamp duty is done from a valuation.
just done one within the last 6 months and thats the process here in nsw and if you did it this way it would be the same for all states.
this also gives you a start for gst as you will need this if every you developed or sold.
usually when a person is going into a jv and they are throwing the land into the deal you need to work out a value so I use this method.

I think he means that stamp duty is paid on the actual valuation of the land.

When I transferred my Grandma's house to my mum we just used a REA appraisal and the Land Titles Office was happy with that - but that was 6-7 years ago.

 

[grossreal]

hi simon
don't think thats the go any longer.
even an auction price was not accepted last time and I had to get a valuation done.
you can put anything you want as a transfer fee for your books but for stamp duty it requires to have a formal price and most solicitors will ask for it as they are the ones that have to do the transfer.
the form is a single sheet normally

 

[JoyBoy]

Firstly, the ATO doesn't administer stamp duty, the state revenue authorities do that. I'm not sure about the stamp duty implications, but with regards to question 2, if you sell land worth $300,000 to a friend for $1, the market substitution rules will come into play, and the ATO will regard you as selling it for $300,000. Therefore you will be assessed on a $299,999 capital gain.

 

[windsor]

Firstly, the ATO doesn't administer stamp duty, the state revenue authorities do that. I'm not sure about the stamp duty implications, but with regards to question 2, if you sell land worth $300,000 to a friend for $1, the market substitution rules will come into play, and the ATO will regard you as selling it for $300,000. Therefore you will be assessed on a $299,999 capital gain.

So if I was to sell 1 block of land to a freind for $1, I being the "seller" I would have to pay Capital Gains Tax on $299,000 the market value of the land at the time of sale.

The buyer wouldnt have to pay anything other then the Stamp Duty on the $300,000 is this correct ?

 

[skater]

So if I was to sell 1 block of land to a freind for $1, I being the "seller" I would have to pay Capital Gains Tax on $299,000 the market value of the land at the time of sale.

The buyer wouldnt have to pay anything other then the Stamp Duty on the $300,000 is this correct ?

While no expert on the matter, I believe that is correct.

 

[windsor]

Thank you for all your replies, so that would be the reverse if I was to give my freind the land as a gift at no cost he would then need to pay the Capital Gains Tax ?

 

[skater]

Thank you for all your replies, so that would be the reverse if I was to give my freind the land as a gift at no cost he would then need to pay the Capital Gains Tax ?

I could be wrong, but I believe you would have to pay the CGT.

 

[alexlee]

Thank you for all your replies, so that would be the reverse if I was to give my freind the land as a gift at no cost he would then need to pay the Capital Gains Tax ?

I'll be your friend! Give me land for free and I'LL pay your CGT! Please?
Alex

 

[JoyBoy]

Thank you for all your replies, so that would be the reverse if I was to give my freind the land as a gift at no cost he would then need to pay the Capital Gains Tax ?

The CGT event would relate to the person disposing of the asset, which in this case is you.

 

[windsor]

Sorry to bring this topic up again, after seeing an accountant and taxation lawyer and asking them if the purchaser is required to pay any CGT on land that he is buying for $1 that has a market value of $300,000 none of them could give me a definite answer.

From the ATO Website:
http://www.ato.gov.au/individuals/content.asp?doc=/content/36556.htm

Adjustments to capital proceeds
In some cases, if you receive nothing in exchange for a CGT asset (for example, if you give it away as a gift) you are taken to have received the market value of the asset at the time of the CGT event. You may also be taken to have received the market value if:

* your capital proceeds are more or less than the market value of the CGT asset, and
* you and the purchaser were not dealing with each other at arm's length in connection with the event.


Please correct me if Im wrong, the land is being sold for $1 back to the previous owner which is part of a subdivision and that has a market value of $300,000. Is the ATO saying that the purchaser would still be required to pay CGT on $299,000 even though it was not a gift??

 

[Rob G.]

Please correct me if Im wrong, the land is being sold for $1 back to the previous owner which is part of a subdivision and that has a market value of $300,000. Is the ATO saying that the purchaser would still be required to pay CGT on $299,000 even though it was not a gift??

"Being sold back to the owner" - can you explain the chain of events and whether this is all pursuant to some original contract or option ?

Each post is bringing out a bit more info that is making previous comments inappropriate - always dangerous stating an opinion based on incomplete facts.

Cheers,

Rob

 

[windsor]

Hi Robb,
It dosent change the fact the land is being sold for $1. So its not off the tracks as it still leads to the same questions regarding who pays CGT.

Farm land being rezoned for residential use.
On the contract the developer has to sell back normal size lots to the owner for $1 each as stated on the contract.

Cheers

 

[Rob G.]

Farm land being rezoned for residential use.
On the contract the developer has to sell back normal size lots to the owner for $1 each as stated on the contract.

Cheers

How is the Farmer and Developer involved ?

This is seems much more complex than a simple disposal of land on the capital account.

Is this part of a business or profit making scheme - in which case CGT is irrelevant ?

Is there a joint venture, or JV entity, or is the Developer an agent ?

If CGT applies, is this a continuum of events for a disposal, or are there subsequent CGT events on performance of contracts or exercise of options ?

This thread could end up giving opinions which are completely wrong if some important detail is missed, which is probably why a Tax Lawyer with all the facts struggled in the first place.

Cheers,

Rob

 

[letiha]

Well I've just put in my application to do my Masters degree starting in the new year, my first unit is going to be on Capital Gains Tax...should be able to get my head around this stuff sooner of later.

 

[coastymike]

And the reason giving advice on a forum is very dangerous.

 

[Ausprop]

Well I've just put in my application to do my Masters degree starting in the new year, my first unit is going to be on Capital Gains Tax...should be able to get my head around this stuff sooner of later.

that's if this is actually a CGT event, which it is increasingly sounding like it isn't