Transfering ownership to spouse?

[D3xx]

Four years ago my wife and i bought a block of land as an investment. We purchased in her name. The thinking was that any tax on capital gain would be minimized that way as she earns little. There is no mortgage on the block as we used redraw from our primary residence.

The market has turned sour and the block has dropped hugely in value. If we sell, it will be for a major loss. I am thinking of transferring ownership to me so that i can use the capital loss as an income tax offset. However would that mean that i'd have to pay stamp duty and settlement fees again? Is there a simple transfer of ownership between spouses that costs less?

 

[Terryw]

For CGT purposes a transfer will be assessed at market value. So you couldn't do that - from the wife at market value and then sold by you at market value = wife gets the loss.

 

[Ausprop]

get a loan on the block to allow you to build a house on it, then flog it. the dev margin should cover some of your losses. the losses that you do inur will be deductible to both of you (equally)

 

[Terryw]

Maybe it could be argued that the wife was holding it as trustee for the husband or both jointly. this will depend on the circumstances including if anything has been claimed so far.

 

[womble66]

Cant Capital loss only be offset against Capital gain and not Income Tax??

 

[lizzie]

Cant Capital loss only be offset against Capital gain and not Income Tax??

very true - we found that one out the hard way (but not financial way thank goodness).

a capital loss can only be offset against a capital gain - not your personal income.

however a capital gain is added to your income and taxed.

but unfair really, but that's how it is and gotta play by the rules.

 

[Terryw]

I've heard that it used to be the case that trusts could get around this by reclassifying income - but I am not sure if this is the case any longer.

 

[D3xx]

get a loan on the block to allow you to build a house on it, then flog it. the dev margin should cover some of your losses. the losses that you do inur will be deductible to both of you (equally)

This is most likely what we will do. The block is in my wifes name. It was purchased for $180k and is now worth $140k. We've paid over $20k in interest. However, since the assets is not income producing, we cant claim any of that back. The cost of building a house suitable for renting would be approx $200k. Houses in that area sell for at least $400k so we should be able to break even in the end. How would i go about attributing the final sale price 50/50? This would cover my building expenses and provide her with $200k to clear the block.

The last challenge is getting finance to build. I can tell the bank that it is a rental investment and, therefore, factor in the expected rent as income. But even then i expect that i dont earn enough to qualify.

 

[Terryw]

You can claim interest on other costs on vacant land if it was your intention to build a rental property - the authority for this is the case of Steele.

Of course, if your wife has no income it may not help in the short term, but the losses may be useful in the future.

 

[investwest]

transfering property

My inlaws have a property they want to sell. They bought it before 1985.
They originally bought it as a family interest, but it is in their names only. When they sell they want the proceeds to be divided equally between themselves and their three children. What would be the best process to do this?.

 

[Terryw]

Unless they held it as trustees for the family they will have to sell, wear the tax if any (maybe pre CGT) and then pay over the money to members of the family as gifts.

 

[marg4000]

Pre 1985 should be CGT free (from memory I think it came in in September), so the process would be to sell the property, then distribute the money as they see fit.

Unless they are on a pension, which is an entirely different ballgame as Centrelink has rules regarding gifting, deprivation of assets etc.
Marg

 

[Kristine..]

...It was purchased for $180k ... The cost of building a house suitable for renting would be approx $200k. Houses in that area sell for at least $400k...

Hi D3

I bought land in my name and Mike and I built the house. The loan for construction was always in two names and the ATO has had no problem with this over the 11 years I /we have owned the property

However, why sell? We built an exec house and it has always earned surplus income. It is in a street of quality houses all built about the same time and is always rented within days of the board going up.

Property is very forgiving provided you don't put it up for adoption.

In the long term scheme of things, if you do decide to build you will have a $400,000 asset producing income, rather than vacant land incurring holding costs. Not that there is any problem with that, but if you have the opportunity to build you may wish to give this serious consideration.

Don't put obstacles in your own way. There is nearly always a way to structure financing but you have to talk to a broker / lender who is 'into' doing it.

Cheers
Kristine