Selling PPOR to Trust

Hi gang

We intend to sell our PPOR to our HDT (it worries me that these acronyms are starting to become second nature ) in order to take advantage of the equity for another personal project and the negative gearing benefits.

'Someone' told me there was some approach that would minimise the Stamp Duty payable on the transfer (we're in Queensland) if we are selling this to an entity in some way related to us, but the only relationship is that PPOR is in my wife's name and she is also a beneficiary of the Trust.

The idea of there being a loophole in Stamp Duty payable didn't sound right to me as, I assume the Govt will want to take as many of my dollars as they can, regardless of how clever I try to be in transferring assets. Has anyone heard of this suggested Stamp Duty saving, or is this one of 'those' stories ?

Cheers
Carl

Hi Carl,

As I understand, the only instance in which stamp duty is not payable when transferring assets is when it happens between spouses and when the asset is the PPOR. I also think that no stamp duty is payable when the asset is coming through a will. Having said that, I’ll be happy to be re-educated

Regards,

Artgul

Hey Artgul

Cool - that makes perfect sense. And looks like an option that might work for all is if the missus kicks the bucket and wills it all to me

Just joking (in case she signs up to the forum later )

Thanks !
Carl

We did exactly this last year in QLD (PPOR to HDT), but we had to pay full stamp duty. I won't be very happy if there is a way around this, but I find it hard to believe that there would be.

Also, someone may correct me, but I believe it is referred to as a tranfer, not a sale.

Hi Carl,

Be very, very wary of selling your PPOR to HDT.

As I understand it:

1) The negative gearing may not be allowed, as it could be caught by the anti-avoidance provisions (Part IVA) of the Tax Act. (Refer http://law.ato.gov.au/pdf/tr02-d02.pdf.)

2) You are unlikely to obtain any land tax exemptions, as HDTs are not entitled to the land tax threshhold (at least in NSW).

3) You lose the benefit of the capital gains tax concessions you would ordinarily get by owning the property in your own names.

I recommend you speak to a good accountant about your position, as it could be a very expensive mistake to make.

MichL.

Hi MichL

I assume the points you're driving at are:

1) that you can only have one PPOR at once (apart from a brief transition period); and

2) living in a home which you are renting from your own trust may attract adverse ATO attention and you would need some detailed advice about whether this is something you want to do, whether you have good reasons to do it and the best structure to employ.

I got the impression that Carl and Johny B were not renting from their trust...but rather they have sold the family home CGT free to their trustee and the former family home was now an IP with third party tenants...nothing wrong with that. But maybe I've got the wrong end of the stick????

I guess the other things to bear in mind are:

1) this is only a draft tax ruling. The ATO doesn't always get it right (but unlike most players on the sports field, they can change the rules of the game if they lose! )
2) with the ATO you generally have to pay up first and fight later. Most ordinary people can't afford to do both.
3) the ruling relates to unit trusts or hybrid trusts. If the primary driver was asset protection and say a discretionary trust was used, perhaps a different analysis applies (bearing in mind the personal tax benefits disappear in that case as does the CGT free status of the PPOR even though you're living in it and your trust owns it ).

Cheers

Gee MichL I nearly swallowed my tongue when I read your post !

Nigel is right about what I'm setting out to do, or at least my wife is selling her PPOR to a HDT of which we are beneficiaries for the purpose of that Trust keeping the property as an investment.

I've seen too many things to want to even talk about doing anything dodgy, let alone think about doing it myself - although I guess my question was about 'minimising' the Stamp Duty :-)

I enjoy life 'on the outside' too much and I am way too pretty to go to jail ;-)

Thanks for the heads up tho'
Cheers