Forums / Getting Technical / Legal & Accounting / selling at purchase price

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  • Profile photo of Jsoe000Jsoe000
    Participant
    @jsoe000
    Join Date: 2015
    Post Count: 5

    Strange question: Can I sell my property at purchase price? Really can’t be bothered with CGT and stuff, just wanna repay mortgage. Is that even possible in NSW?
    I’m just thinking as long as the banks get their mortgage back, it should be fine.
    What’s the rule around this scenario please? Thanks.
    P.S. Selling it to sister at cost price

    Profile photo of blackhotelblackhotel
    Participant
    @blackhotel
    Join Date: 2010
    Post Count: 139

    Mate, you can sell for whatever price you want. I know NSW is known as the nanny state but this is ridiculous. There are no laws/requirements to sell at a certain price. Sometimes people sell for allot less than the purchase price. It’s called ‘a loss’.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 11,992

    I think what Jsoe is referring to is selling the property at a favourable price to a related party i.e Sister.

    There is nothing to stop you selling the property at any price however if the sale was done on favourable terms (Substantially less than the market value) then the State Govt may require the purchaser to pay stamp duty on the deemed higher price.

    The same would go for the ATO in regards to CGT if the property was used for investment.

    Cheers

    Yours in Finance

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
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    Profile photo of Jsoe000Jsoe000
    Participant
    @jsoe000
    Join Date: 2015
    Post Count: 5

    Hi Richard,
    So the purchaser would have to pay stamp duty on market price. Then, I’d still have to pay ATO CGT at market price even though there’s no gain for me?

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,110

    Yes you can, but both duty and CGT would be assessed at market value. This would not save you the hassle of doing the CGT return, even if there was no legitimate profit because the sale is a CGT event and you would need to declare it on the tax return. There are also asset protection issues to consider.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
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    Profile photo of Corey BattCorey Batt
    Participant
    @cjaysa
    Join Date: 2012
    Post Count: 1,010

    Yes you can, but both duty and CGT would be assessed at market value. This would not save you the hassle of doing the CGT return, even if there was no legitimate profit because the sale is a CGT event and you would need to declare it on the tax return. There are also asset protection issues to consider.

    Terry’s hit the nail on the head.

    The ATO is onto these sorts of ideas which can reduce the revenue intake for the government. :)

    Corey Batt | Precision Funding
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    Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,325

    Hi Jsoe,
    If it is important to be in your sister’s name, then the CGT and Stamps will be the cost to do it. Keep a couple of things in mind re CGT:-

    1. Have you owned it longer than 12 months, or not? (A 50% discount on the CG calculation if held longer than 12 months).

    2. Consider whether to sell in this FY or next (and Sale is deemed to be the Contract date not settlement date – I think…. but check). It might make no difference to you, but it is best to be aware of your options. Usually people try to sell in a year when their Income is less. That is because a Capital Gain is added to their Income, and then Tax paid at their marginal rate. It also means, if you sell in the NEXT year, you won’t need to do your returns for about 18 months – but if selling in this year, the CG etc. will be part of this year’s Tax Returns.

    3. If you have other capital Losses (e.g. shares that you know have tanked, and you know you must sell them at a loss) sell them first as (I believe) a loss ahead of your Gain can offset it. e.g. a loss of $10k and a CG of $50k becomes a total CG of $40k. That gain is then added to your Income for the year and you pay Tax accordingly (as though that is your Income for the year – which it is).

    4. Maybe your Sis will want to give you a wee “gift” to help offset your costs. Keep in mind, that she would have to pay Stamps no matter WHO she buys from – so that was always going to be “hers to pay”. If you are going to pay CGT on the true value, maybe she can pay a price halfway to that market value – that way, you aren’t bearing all the cost yourself.

    And no, I am not an accredited adviser, so treat these all as “ideas” and run them past your accountant before relying on them. They may well have other thoughts for you to ponder too……

    Benny

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