Sell IP's to pay off PPOR?

[quoll]

JPM
I like that idea, I've got to go and see Steve the accountant anyway so that's another question for him.

All
I spoke with Dale the conveyancer it turns out that to move the properties into the family trust would require about 10k in state government taxes for each IP, but to buy the wife out would only cost ~$400 plus bank fees.

Spend an hour or two looking at property ads with the wife and not much around to replace IP1 and IP2, so transfering some debt into them would be about the cheapest option. Wouldn't get rid of mortgage but would reduce it by 100k so that's not bad, and I'd get more tax back due to more expenses.

Haven't spoken with accountant or the bank yet, too busy doing the 9-5 work thing.

quoll

 

[JPM]

Quoll,

Let me know what your accountant says.

It's always good to check up on my accountants advice. After all it's my head on the ATO chopping block if it's wrong!!!!!!

Jason

 

[Robyne]

Quoll,
If you bought your wife out wouldn't you have to pay stamp duty on her portion?
Robyne

 

[beech]

You can still pay interest on IP 1 from IP2 LOC instead of using your cash.

just not interest on IP 1 from the loc on IP1.

from what ive read on here thats how Ocean View holds his properties when he needs to.

 

[quoll]

Robyne
I would have to pay stamp duty if transfering into trust due to seperate entity, but just to remove wife from title, stamp duty doesn't come into it, nice. Also need to redo mortgage so wife is not on that.

All
Had a look at some numbers and if we sell we get about $40k more than if we reorg. BUT the killer, to purchase two more properties of similar size, location, rent return would cost us $120k more so I think we are better of to do the reorg.

JPM
Haven't seen account yet will phone today and make appointment.

Cheers
quoll

 

[Robyne]

Hi quoll,
Thanks for answering my question. I just want to make sure I understand. By taking your wifes name off the title you do not have to pay stamp duty but you CAN realise her half of the capital gain on the property (less CGT of course). Is that correct?
Robyne

 

[kierank]

I believe one has to be careful here. Below is my understanding:

Stamp Duty is State revenue and the rules are different for each State. In Qld, any change of ownership on titles incurs Stamp Duty, whether PPOR or IP - eg last yeat, I change my PPOR to 1% me, 99% partner and had to pay S/D. I can't vouch for SA.

CGT is Federal revenue. For PPOR, a change of ownership on titles does not incur CGT. For IP, a change of ownership DOES incur CGT. So, if even you keep the same owners but change their percentages, this causes a CGT event and the "seller" will be liable for CGT.

 

[quoll]

kierank
That is not what I wanted to hear, had a busy day will have to phone accountant in the morning and ask his advice.

Peter 147
It sounds like CGT needs adding into my equation this will change the figures a little.

Oh well
quoll

 

[Peter 14.7]

Hey Quoll

Firstly, your thread has a lot of replies. Way to go!!

Yes CGT applies. For the record, if owned more than 12 months then only 50% applies at marginal tax rate. As stated in my case I planned to sell in early 2003/4 and have minimised my personal income as company director. Pushing income to next year via a trust to own my company. That way I can claim back franking credit according to accountant.

As stated earlier one thing I considered and really, in the end, was the hook, was that prices for Surry Hills NSW are unrealistic against historical returns. IP went to Auction and set new record for the street.

So sold IMHO at top of market here. Ask yourself...Where is your market at? Still more growth or will it be minimal, flat or decline in the next few years?

Peter 147