Spouse Transfers (NSW) Duty Free

Discussion in 'Accounting and Tax' started by Paul@PFI, 3rd Sep, 2014.

  1. Paul@PFI

    Paul@PFI Tax, SMSF & Planning

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    Frequent posts here mention the Victorian concession which allows a spouse transfer free of duty.

    What is little understood is a similar provision exists in NSW. Its a bit more rigid than the Vic exemption however.

    s104B of the Duties Act NSW permits a transfer from ONE spouse so that after transfer the ownership is then either joint tenancy or 50/50 Tenants in Common.

    The one big catch is that at the time of the transfer the property must be residence of the parties. This can be ideal if a new PPOR is being acquired and the former PPOR was owned by one of them....

    This option may allow:
    - Refreshed loans ?
    - No CGT if the MR exemption applies
    - Restructured ownership
    - Maybe even use of the increased loan and change of ownership to pay down non-deductible debt (new PPOR strategy)

    Its the sort of area of advice where personal advice is really needed to identify any potential benefits. My recommendation is then to handover to a lawyer / broker to facilitate it. I prefer to use Terry_W since he handles it all. Good legal support (contract, settlement duties act etc) and loan broking.
     
    neK and jkat like this.
  2. r3ckless

    r3ckless Member

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    Any chance there us an exemption to change the split from 50/50 tic to 80/20 tic? Duty free
     
  3. Paul@PFI

    Paul@PFI Tax, SMSF & Planning

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    No. The 30% change would be 30% dutiable.

    s104B only permits from a sole owner to a JT or 50% TIC.

    If only you could take the title deed on a flight and be duty free :)
     
  4. Nem

    Nem Member

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    Hi Paul,

    So if we are 50% joint tenants and one of us transfer ownership of the house to another, while house is our PPOR, duty is not payable?
     
  5. Terry_w

    Terry_w Member

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    payable in this case. Final ownership must be 50/50 for the exemption (in NSW)
     
  6. Paul@PFI

    Paul@PFI Tax, SMSF & Planning

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    100% with Terry here. However if its 100% sole ownership and you want it 50/50 TIC or joint tennacy and its the residence at date of transfer then no duty. The day after you can move out, make it an IP and in the change of ownership refinance it and have a bigger loan.
     
  7. Tyla

    Tyla Member

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    Great info, Paul and Terry. Can I clarify that with an example to make sure I understand that correctly?

    PPOR value - 400k under wife's name
    Loan - 100k remaining

    After using this spouse transfer
    Wife's loan - still 100k
    Husband's loan - 200k assuming he can get 100%
    Wife's equity - 200k to invest somewhere or buy ppor

    if converted to IP, now combined 300k will be deductible loan instead of original 100k. Is that correct?
     
  8. Terry_w

    Terry_w Member

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    that is correct :)
     
  9. Tyla

    Tyla Member

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    Thanks, Terry. Excellent info.
     
  10. Paul@PFI

    Paul@PFI Tax, SMSF & Planning

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    Not quite.....

    The original loan is $100K....When the wife disposes of 50% of her interest to spouse with a new $200K loan the wife loses 50% deductibility on her loan. Why ? Because the $100K relates to a 100% share of ownership..Reality she will pay it down to $50K.

    So the new deductible loan will be $250K.
     
  11. Terry_w

    Terry_w Member

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    Yes Paul is actually correct. I missed that.
     
  12. Paul@PFI

    Paul@PFI Tax, SMSF & Planning

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    I knew you knew. We are working on same issue with a real client.:)
     
  13. tess85

    tess85 Addicted to SS

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    Hi there,

    This is an interesting thread, thanks!

    So what about JT to 50:50 TIC?
     
  14. Tyla

    Tyla Member

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    Thanks for clarifying that, Paul. It's still better than 100k.
     
  15. Terry_w

    Terry_w Member

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    For tax purposes there would be no differences, but this could be done with nominal stamp duty and asset protection benefits.
     
  16. TFE

    TFE Member

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    Can someone explain how we do this? I spoke to my mortgage broker and she says I can't borrow money to buy 50% in my name only, that all loans against 1 property need to be in both names. Has anyone actually done this and can give some advice about it? Also with regards to the tax implications or links to a ruling?

    Cheers
     
  17. Terry_w

    Terry_w Member

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    Loans don't need to be in both names. Could be one name with the other providing a guarantee.
    Relevant tax legislation is s8-1 itaa97. You also have to consider Part IVA ITAA36. There is also a tax ID for a spousal transfer.
    Paul and I have clients who have done this.
     
  18. Paul@PFI

    Paul@PFI Tax, SMSF & Planning

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    You are assuming that the deduction is based on the name the loan is in. It is the legal title that determines deductions. Loan can be in three names if you wanted but only the two on title would share income and deductions based on the % interest on title.