Stamp Duty

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From: Hiram Ng


Here's an interesting one for the experts:

1) If a property is sold well below market value, and I mean WELL below, how is stamp duty calculated:

-On the contract of sale price
-On the price actually transferred (if you have rebates in the contract etc)
-On the market value.

2) Lets say a company owns a $1 mill property and nothing else. I want to own the property. Instead of buying the property I buy the company. Stamp Duty on company transfer of $1 mill is $6000. But if I bought the property, stamp duty on 1 mill is $60K and more depending on your state. What do you guys think?

Cheers

Hiram
 
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Reply: 1
From: Tom Cleary


Hiram
1. Stamp duty is payable on sale price
2. Quiet legal, the property is still in the company name, therefore no sale of property has taken place, it how a lot of business premises get sold.
Regards
Tom
 
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Reply: 1.1
From: Dale Gatherum-Goss


HI

I think you'll find it depends upon which state you are in. And, there are special rules in Victoria (and possibly other states too) to stop stamp duty being avoided through this technique. Please seek proper legal advice.

Dale
 
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Reply: 2
From: Anonymous


I don't think you're right.

The various state revenue offices are too crafty to allow you to exploit the differential between conveyance duty on shares 0.6% and other property (around 1.5-5% depending on value of property and the state you're in).

They have a little thing colloquially known as "land rich" duty. But from memory it has a fairly high threshold value (around $1M??) so maybe you can do it for lots of small fry. But there's probably tracing rules as well so maybe not a good idea to do it using a company group.
 
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Reply: 2.1
From: Ctrader .


In Victoria you will find this is covered under Revenue Ruling SD.034
Try looking at www.sro.vic.gov.au
 
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Reply: 3
From: Jas


>2) Lets say a company owns a
>$1 mill property and nothing
>else. I want to own the
>property. Instead of buying
>the property I buy the
>company. Stamp Duty on company
>transfer of $1 mill is $6000.
>But if I bought the property,
>stamp duty on 1 mill is $60K
>and more depending on your
>state. What do you guys think?

This scenario was thrown around at a seminar I was at recently. The old maxim 'look before you leap' works well here. The idea has been around long enough that the government has things inplace. Check them before leaping.

Cheers,
Jas
 
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Reply: 3.1
From: RM .


Just to change tack a little on this -

Can someone please explain if Stamp Duty is classified as a borrowing cost? That is, can it be depreciated over a five year period similar to conveyancing fees, mortgage registration, etc etc or deducted or is it simply a "sunk" cost.

I was of the belief it could be claimed or depreciated, but I came across this reply in a post in the Apprentice Millionaire Guide -

"Each IP costs about $35 a week after the first year because for the first year in the ACT most IPs are cash flow positive after tax as the purchase costs (eg stamp duty) are deductable in the year of purchase.
Grant"

So can it be depreciated or deducted or not?

Thanks RM.
 
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Reply: 3.1.1
From: Steve Piggott


stamp duty is a purchase cost which can be deducted from a gross profit.
It is not a depreciable cost.... It can be an annual deduction if it is incorporated in your borrowings.

Interesting scenario about corporate ownership. A company and its holdings can be bought and sold with little or no tax issues compared to a property. Better still why not just change the directors. Eg old directors resign and new ones appointed .... much more economical. No stamp duty on newly appointed directors...

Happy investing.... Neb
 
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Reply: 3.1.2
From: Jas


> Can someone please explain if Stamp Duty is classified as a borrowing
> cost? That is, can it be depreciated over a five year period similar
to
> conveyancing fees, mortgage registration, etc etc or deducted or is it
> simply a "sunk" cost.

No, it forms part of the cost base for CGT

Jas
 
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