Tax Tip 101: Transfers Between Spouses and Stamp Duty in QLD

Discussion in 'Accounting & Tax' started by Terry_w, 22nd Mar, 2016.

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  1. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Transfers Between Spouses and Stamp Duty in QLD


    This is a brief summary involving transfers of land between a married or de facto partners where there is no breakdown in relationship.


    Firstly note that ‘de facto partner’ is defined under the Schedule 6 of the Duties Act 2001 QLD as

    “de facto partner means 1 of 2 persons who is a de facto partner within the meaning of theActs Interpretation Act 1954, section 32DA, if the persons are living, and for at least 2 years have lived, together as a couple on a genuine domestic basis within the meaning of theActs Interpretation Act 1954, section 32DA, or have so lived together as a couple for at least 2 years.”

    DUTIES ACT 2001 - SCHEDULE 6 -- DICTIONARY


    Relevant Legislation
    Section 151 Duties Act 2001 (QLD)

    DUTIES ACT 2001 - SECT 151 151 Exemption—particular residences



    Going from one name to both names possible?
    Yes, if the main residence and both end up as 50/50 tenants in common or joint tenants then it can be exempt from duty.


    Investment Property?
    No exemption available for investment properties – unless the property will become the principal residence of the parties.


    Transfer from one name to the other name possible?
    No it is not possible to get the exemption where only 1 party will be the final owner. Both parties must be the final owners.

    Consideration?
    The exemption only applies for gifts. I.e. if Spouse A pays Spouse B for the transfer of the interest the exemption will not apply.


    Summary

    For QLD land transfer duty will be exempt where all the following apply:

    · The parties to the transfer are either married, in a de facto relationship or a registered relationship, and
    · One of the parties is transferring to the other, and
    · Both parties will end up owning the land as either joint tenants or tenants in common 50/50, and
    · The residence will be the principal residence of the parties, and
    · The transfer is by way of a gift


    Tax Issues

    Subsection 2 of s151 states that the above can apply even if a liability under a mortgage is assumed by the other party. So Spouse A can transfer 50% of the property owned to spouse B and the loan can remain the same with spouse B being added to the existing loan of Spouse A.


    From a tax point of view the interest on the loan cannot be deductible to spouse B because he/she has not borrowed to purchase 50% of the property. Spouse A’s loan interest would only be deductible on 50% of the balance because only 50% of the property is owned now and the remaining 50% disposed of.


    Transfer of title is a CGT event with the transferee (the one transferring) being the one to pay the CGT unless an exemption, such as the main residence exemption, applies.


    Lending Issues

    Any change in title will mean the mortgage has to be discharged and a new loan applied for under the new owners names. Where both parties are borrowers originally there must still be a discharge of mortgage because title will change from one name to two. This will probably result in a need for the lender to requalify borrowers again.


    See your lawyer before attempting this as many side issues are involved.






    For the situation in NSW See Tax Tip 68: Transfers Between Spouses and Stamp Duty in NSW

    Tax Tip 68: Transfers Between Spouses and Stamp Duty in NSW
     
  2. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Many issues can pose a stamp duty concern in QLD that arent a concern in any other state. QLD has indirect stamp duty rules which can impose duty on a change of owner that isnt a change of title. Its very board and catches many issues that arent a sale as such.

    This can apply to a trust interest, a unencumbered partnership interest and many more arrangements that would never pose a concern in other states. It can also severely affect a development JV.

    Competent legal advice is strongly recommended for all QLD property acquisition and if ANY future change is even contemplated in advance then advice taken on QLD stamp duty so that the owners understand the rules. And secondly, once QLD property is acquired do not make any changes to the partners, trust, trust deed, trustee company or ownership without specific legal advice on the QLD Duties Act 2001.
     
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  3. Dsign

    Dsign Well-Known Member

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  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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  6. Bruz

    Bruz Well-Known Member

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    What if I transfer 50% ownership to my wife as ppor and few weeks/months later it becomes an investemnt property?
     
  7. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    not sure what aspect you are referring to but

    Interest would become deductible for the portion of any loan used to acquire each taxpayers interest in the property
     
  8. Propin

    Propin Well-Known Member

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    Someone I know is now seperated and had zero knowledge of financial affairs. At some stage her husband had transferred some of the ppor to her. I’m guessing maybe 4 years after he purchased. While together they moved out of PPOR and rented it for about 7 years. They moved back for a year then split and sold. I’m guessing neither kept any records. For CGT calculation purposes, what would be easiest way to find out when the property was transferred to a partner? I’m guessing they’ve chucked a lot of deductions but you can only help so much.
     
  9. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    They can do a land titles search to see the history of transfers of the property which should give the dates.
     
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  10. Propin

    Propin Well-Known Member

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    Thanks, I found it
     
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  11. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    And market values at relevant times may be needed from a reg valuer to reconstruct issues.
     
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  12. Sgav

    Sgav Well-Known Member

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    Am I right in assuming it's not possible to add your spouse to the title of a property that you are living in, and increase the potential of deductible interest should that property later become an IP, whilst avoiding paying stamp duty?

    Scenario:

    Property A is in QLD. Purchased for 500k, now worth 800k. Debt of 400k. 100% ownership belongs to wife (Jill).

    One year later Jill and Jack marry.

    Jill wants to sell half of the property to Jack, at the current 800k valuation, whilst adding Jack to the title, and be exempt from stamp duty. Jill's plan is for Jack to end up having a 400k loan that he has borrowed for, which results in Jill having 400k of cash (the 400k that came from Jacks loan). Jack's loan won't currently be tax deductible.

    1 year later, Jill and Jack move out of the property and purchase a new PPOR (property B, also in QLD). Jill uses the 400k she got from Jack's purchase of half of property A for this PPOR (property B).

    End result is 400k more of deductible interest compared to if Jack had used 400k of his borrowing capacity for Property B (because it's a PPOR).

    **My initial thoughts are this is not possible**.
     
  13. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    sell = consideration given.
     
  14. Scott No Mates

    Scott No Mates Well-Known Member

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    Does the transfer trigger CGT if the property was an IP at any time prior to it becoming the main residence? If not, does the spouse inherit the purchase price as the cost base?
     
  15. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Yes CGT will apply unless fully exempt or there is no gain
     
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  16. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    It is always a CGT event. Even $0 exempt main residence sales must be reported. No calcs. Just reported. I usually recommend the address details are reported to assist data matching. ATO otherwise do have questions sometimes. And if no event is reported they can send audit letters for unreported capital gains on property

    For Individuals, exemption or rollover codes are:
    A - Small business active asset reduction (subdivision 152-C).
    B - Small business retirement exemption (Subdivision152-D)
    C - Small business rollover (Subdivision 152-E).
    D - Small business 15 year exemption (Subdivision152-B).
    E - Foreign resident CGT exemption (Division 855).
    F - Scrip for scrip rollover.
    I - Main residence exemption (Subdivision 118-B).
    J - Capital gains disregarded as a result of the sale of a pre-CGT asset;
    K - Disposal or creation of assets in a wholly-owned company (Division 122).
    L - Replacement asset rollovers (Division 124).
    M - Exchange of shares or units (Subdivision 124-E).
    N - Exchange of rights or options (Subdivision 124-F).
    O - Exchange of shares in one company for shares in another company (Subdivision 124-G).
    P - Exchange of units in a unit trust for shares in a company (Subdivision 124-H).
    R - Demerger rollover (Subdivision 125-B).
    S - Same asset rollovers (Division 126).
    T- Small Business Restructure Roll-over (Subdivision 328-G).
    U- Early stage investor Subdivision 360A.
    V- Venture capital investment Subdivision 118F.
    W- Affordable housing discount.
    X - Other exemptions and rollovers.
    Codes G, H and Q are not valid for the individual form.

    Many of these apply to shareholder corporate actions too.