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  • Profile photo of Quantum LeapQuantum Leap
    Participant
    @quantum-leap
    Join Date: 2004
    Post Count: 56

    Hi Folks,

    I’m new to this forum, and wondering if anyone know’s whether back-toback settlements are legal and done in Asutralia.

    I’m aware of them being quite popular in the USA but haven’t heard of it being done here.

    The theory is to purchase a property on a long settlement (3-9 months), then find a new buyer and have the new buyer go to settlement. I’m then looking to make my gain via disbursement of funds at the end. Theoretically I shouldn’t pay stamp duty because I didn’t actually take title? Would I be liable for CGT?

    Cheers

    Rick

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,173

    Richard, these are legal and done all the time in Australia. Unfortunately you will be up for stamp duty as you are buying and onselling. You would also be up for CGT.

    Terryw
    Discover Home Loans
    North Sydney
    [email protected]

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
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    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of Still in SchoolStill in School
    Member
    @still-in-school
    Join Date: 2003
    Post Count: 1,844
    Profile photo of melbearmelbear
    Member
    @melbear
    Join Date: 2003
    Post Count: 2,429

    Yes, SIS. Although a flip could theoretically involve you settling on it and then onselling.

    With onselling prior to settlement, it is wise to double check that your buyer will be settling, or else you will need to be able to settle on your purchase.

    Cheers
    Mel

    Profile photo of Quantum LeapQuantum Leap
    Participant
    @quantum-leap
    Join Date: 2004
    Post Count: 56

    Thanks guys,

    Great to hear that’s it’s done and legal. Why would I have to pay stamp duty? Isn’t stamp duty only payable when the title is transfered in the stamp duties office? I won’t be transferring title to my name….

    Thanks again.

    Cheers

    Richard

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,173

    Title will be technically transfered to you, then the new purchser immediately.

    Terryw
    Discover Home Loans
    North Sydney
    [email protected]

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of melbearmelbear
    Member
    @melbear
    Join Date: 2003
    Post Count: 2,429

    Richard, the reason it’s a ‘back to back’ settlement, is that title is transferred to you (the first ‘back’) and then immediately transferred to your buyer (the second ‘back’).

    Although when you sit and think about it, it can’t work. Before you can sell it, you must own it, and you don’t have the money to own it until you get it from the buyer. So ‘technically’ you couldn’t really own it – or you are borrowing from your buyer (which their bank wouldn’t allow) or the seller is letting you short settle – ie, pay them the money ‘at a later date’ which happens to really be about 5 minutes time.

    Cheers
    Mel

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,010

    It is normally referred to as a Transfer by Direction and is certainly common in the development field.

    Also you certainly can sell something that you don’t own. It is referred to an Option.

    Cheers Richard
    Ph: 07 3720 1888
    [email protected]
    http://www.yourstatefinance.com

    Specialising in US & IP finance.

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
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    Profile photo of RikkyRikky
    Member
    @rikky
    Join Date: 2005
    Post Count: 313

    Rick

    You can write up on your contract when purchaseing your name (or who evers name your buying) then add and/or nomanie . This allows you at any time during the settlement period to change the name on the contract.
    How ever the new persons name will take over the contract at that price , so you will have to organize your extra dollars around the contract the new owner will know the price you paid for the property.

    Kind regards Rick

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    Profile photo of AUSPROPAUSPROP
    Participant
    @ausprop
    Join Date: 2003
    Post Count: 953

    bear in mind that a put/call option attracts immediate stamp duty for the full sale value, so you would have to find someone willing to give you a call option for 12 months or so. why they would do that I don’t know but it’s a big fishpond out there.

    Rick I think that nominee loophole was closed in most states some time ago. the logic being hat you can’t nominate someone you don’t know yet. in hindsight it always seems easier to make money in the past hey?!

    CGT – I don’t think this is a passive style income and would expect it to attract full marginal tax. check it out anyway.



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    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,010

    Ausprop

    There is no stamp duty on a Call Option in Qld.

    The ‘and or nominee’ clause was closed a couple of years ago but you can still use an assignment letter which attracts no stamp duty and enables you to assign the property prior to settlement to a 3rd party.

    Cheers Richard
    Ph: 07 3720 1888
    [email protected]
    http://www.yourstatefinance.com

    Specialising in US & IP finance.

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of AndoAndo
    Participant
    @ando77
    Join Date: 2015
    Post Count: 9

    Just a question – if you are doing a few of these “simultaneous” settlements a year, do the CG tax liabilities change – because you are doing more it would be classed as a business therefore taxed at a lower rate??

    thanks in advance

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,173

    would be income tax rather than CGT. no discount.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

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