Capital Gain Tax on title change

jshubo

Off the plan purchase, need to change the title before settlement, say from tenant in common (70%+30%) to joint tenant (50%+50%), but the name is the same. There is no stamp duty for the change, but does anyone know whether there is capital gain tax involved here?

Thanks.

laserjet245

tenant之间是什么关系呢？

jshubo

husband/wife

JohnnySu

There is no stamp duty for transfers b/w husband and wife in some states (e.g. VIC) but in others(e.g. NSW ) you will have to pay stamp duty.

JohnnySu

Technically CGT has to be considered as well.
This is calculated based on the movement in market value of the ownership being transferred.

jeff_lawsons

I believe this is not an easy question. Assume you have 70% interest and your spouse has 30% interest.

If you change from joint tenancy to tenancy in common, these would be no CGT issue if the tenancy in common is created in equal share.

If you change from tenancy in common (unequal share) to joint tenancy, there would be CGT issue. The underlying CGT asset is the rights to purchase the property.

In your proposed transaction, you are assigning and transferring 20% of your rights under the off-the-plan contract of sale and interest in the properties to your spouse. You will make a capital gain if the capital proceeds from the disposal exceed the asset's cost base. You make a capital loss if those proceeds are less than the asset's reduced cost base.

Normally dealings between family members are not at arm's length and market value substation rule will apply.  The market value of your rights under the contract is the market value of the properties when the proposed transaction takes place less the balance that remains payable under the contract. Also, the market value of your rights under the contract is determined with reference to the market value of the properties, but it is not simply equal to the market value of the properties.

The cost base of the rights that you acquired upon entering into the contract is 20% of the total amount already paid.

However if this property will become your main residency after settlement, then you should keep the original contract as tenant in common with unequal share and change to joint tenant after a few month.  If you did that, there could be no CGT issue as Main residence exemption would apply provide you meet other conditions.

If this property is going to be your investment property the main residence exemption would not apply.

mostwanted

Wow, not an easy one.
But the "market value" of your right should not change that much in a not very long period between contract and settlement, so even its a CGT event it wont be a big cost.
Talk to your accountant.

jshubo

Let's make an example here and can you let me know the CGT figure for both husband/wife? assuming the property is investment.

off-the-plan purchase, year 2012, price 1 million and pay 10% deposit as 100k, husband 70%, wife 30%

settlement, year 2014, market value 1.1 million, change to joint tenant with 50% each. and there is no stamp duty for the change.