My sister has recently purchased a block of land in her name and is now building a house on the block. Initially her idea was to build and sell hence being in her name as she is the lowest income earner. She is now having second thoughts about her approach and is thinking about keeping the house as an investment property and renting it out. It would be negatively geared therefore I told her it would be wiser for the property to be in her husband’s name as he is a high income earner. Is there any way of tranferring it into her husband’s name without paying stamp duty again? The title deed for the land is in her name but the bank loan is in her name with her husband as the guarantor. What are the implications of this scenario? Any comments or suggestions greatly appreciated.
Many thanks
ShelleyAnother good reason why assets should never be purchased by individuals, except for the main residence.
I agree Coastymike but doesn’t help with this situation. Can anyone else offer advice?
Thanks
ShelleyOriginally posted by ss2306:Is there any way of tranferring it into her husband’s name without paying stamp duty again? The title deed for the land is in her name but the bank loan is in her name with her husband as the guarantor. What are the implications of this scenario?
Hi ss
As far as I know, there’s no way of transferring title without stamp duty. Except if she dies and wills it to him – not really feasible.
As for the guarantor business, only if she defaults on the loan will it become an issue. That’s between the lender and borrower, not the office of state revenue.
Thing to do now is to work out your options: sell as initially planned; rent without the higher tax deductions; is it possible to shift his income into her name? e.g. if he was to employer her?
This is another thought that I just came up with so I may just be talking hot air. What if, he leased the property off her for greater than market rent to boost her income. Then, he could lease out the property at market rents and claim a loss??? Is this legal/possible?
Just a few thoughts.
What has caused her to have second thoughts ??
How robust was her initial plan…or is that the reason for the change mid stride ??
I’m not sure why the change in plans. I think she is inexperienced with investing and is not sure which direction she wants to take. I think she likes developing rather than buying already established. She thought she had a sale set up prior to commencement but now that has fallen through and the market has dropped she is thinking of other scenarios.
Thanks for your responses.
ShelleyYou probably wont see this post..
but which state is your friend in? In some states, such as NSW, transfer title between spouses is stamp duty free.
Don’t worry too much. Negative gearing only lasts for a few years. With rising rents, the property will eventually become positive and then she will be saving tax by having it in the name of the lower income earner. (Assuming things stay the same).
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
hi ss2306
tell your friend to keep all dockets and invoices for a min of 7 years get her husband to lend her the money to hold the property and drive the loan down as quick as possible when the property is positive and it will be she can claim the dockets back against any tax she may have to pay and also against any capital gain ask your accountant but she should be able to claim part of the interest on the loan her husband gave her to hold the property.
also tell her that before making any investment make sure you get assistance.
has she started building yet if not she could go jv with a builder and split the costs, liability, and profit and because she is in the low tax bracket save tax.
cut a deal with a local investor he buys end product, builder builds, and she throws in the land, split profit three ways.
33% of something is better then 100% of nothing
look out side the squarehere to help
forget about this one! It’s more financially beneficial to keep it in the individual name, look forward to the future and buy the next one in a discretionary trust!
We buy properties in Adelaide. Immediate Cash Settlements, No Real Estate Agents, No Fees.
[email protected]
phone 0412 437 582Has your sister considered having her husband entering into a salary sacrificing arrangement with his employer for the interest component.
Subsection 138(3) of the FBTAA considers the situation where a benefit is provided jointly to an employee and an associate. It states that where a benefit in respect of the employment of an employee is provided jointly to the employee and one or more associates of the employee, the benefit shall be deemed to have been provided to the employee only.
In National Australia Bank v. Federal Commissioner of Taxation it was held that where the benefits are provided jointly to an employee and an associate, the benefits are deemed to have been received solely by the employee.
If the husband was to enter into an SSA with his employer to salary sacrifice the loan interest and other expenses in relation to an investment property which he jointly own with his spouse the benefit of the payment of the interest and other expenses is being made jointly to him and his spouse who is considered to be his associate. Therefore subsection 138(3) of the FBTAA will deem the benefit to have been provided solely to him.
So the husband will be liable for FBT but subsection 24(1) of the FBTAA allows a reduction in the taxable value of certain expense payment fringe benefits (the ‘otherwise deductible’ rule). Given that the interest would have been deductible then it will not be subject to FBT.
The advantage is that the husband will be able to use gross dollars to pay for the interest expense resulting in a significant tax advantage to the couple.
Please discuss with your advisor and note that this does not constitute advice but merely another option to consider.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
