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Stamp Duty

Discussion in 'Accounting, Tax & Legal' started by Bundy, 28th Aug, 2005.

  1. Bundy

    Bundy Active Member

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    Mermaid Beach
    Hoping someone can assist witht he following question.

    If I purchase a property in joint names with my partner with the view of us building a duplex on it, and putting one in each persons name upon completion, will each of us be required to pay stamp duty/GCT when we strata title the properties into individual names?

    If so, are there and exemptions/reduced rates as we already have paid stamp duty on the original purchase?

    This property in in Qld.

    If so, can anyone suggest a better option?

    Cheers
    BUNDY
     
  2. NickM

    NickM Co-founder Staff Member

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    Hi Bundy
    In NSW
    1. we would draw up a deed of partition on the property
    2. get a valuation upon completion
    3. take the valuation down to council and OSR when lodging the application for the strata title
    4. get titles registered in separate names.

    EG after completion each unit is worth $300K each based on the val - no stamp duty provided that you owned the property 50/50 Tenants in common

    If one valuation was $290K and the other $300K pay stamp duty on the difference. (possibly half the difference)

    May be a good idea to source a property savvy lawyer in Qld. I dont know one off hand.

    Cheers
    nickM
     
  3. Bundy

    Bundy Active Member

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    Thanks for your reply Nick.

    Have received confliciting advice from solicitor and accountant. :rolleyes:

    Just thought that someone on the forum may have some solid advice or even a creative concept.

    Will post the outcome, when I get further clarification.

    BUNDY
     
  4. Bundy

    Bundy Active Member

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    NickM,

    Just a quick question. If you property was valued at $100k pre the development, then upon completion of the development their valued at $600k - $290K and $310 respectively, do you only pay stamp duty on $20K, not on the actual val of the unit going into your name?

    This may well be different to Qld (if I can get some solid clarification) My solicitor has advised that i have to get a val on each villa, and pay stamp duty on half the amount of the val. of the villia which is to go into my name. :eek:

    Half being because I already paid stamp duty on my half of the original purchase of the property.

    This can be a hefty bill if you have a heap of equity in the completed development.

    Bundy
     
  5. NickM

    NickM Co-founder Staff Member

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    Bundy
    the way to get around this situation is as i stated in my first post.
    Without a deed of partition you will pay duty on half of one property and your partner would pay on half of the other.

    Under the deed you would pay on the $20K

    Maybe Nigel can shed some further light/clarification on this position ?

    NickM
     
  6. Nigel Ward

    Nigel Ward Team InvestEd

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    Nick's right on with the process to minimise stamp duty.
    But his maths might be slightly out (altho I hesitate to say that as lawyers aren't supposed to be able to add up! :p )

    The Qld Duties Act also has a provision dealing with stamp duty on a partition i.e. where property jointly is transferred, or agreed to be transferred, to 1 or more of the people who currently own it. (It doesn't matter whether you and your partner currently own as joint tenants or
    tenants in common).

    So as Nick said you'd get it subdivided first and then you both own 50% of both titles.

    Assuming neither of you is paying the other for the partition, the way the stamp duty is calculated is by applying the relevant rate of duty to the amount by which the value of the property transferred exceeds the value of the interest held by the transferree immediately before the partition.

    Assuming that before the partition you and your partner owned half each of the property then the question comes down to what was the value of your share before the partition and what was it afterwards.

    So breaking it down:

    Before partition
    Total Value = $600k (based on valuation i.e. $310k + $290k)
    Your share = 50%
    Partner's share = 50%
    Therefore
    Your value held = $300k (i.e. 600k x 50%)
    Partner's value held = $300k

    After partion
    Total value = $600k
    Your value $310k (based on valuation)
    Partner's value $290k (based on valuation)

    Thus the difference between value of the property transferred compared with the value of property held property held is for your partner -$10k (thus no duty payable) and for you $10k i.e. 310k - 300k.

    Duty on $10k is $150.

    BUT please see your property savy solicitor before doing anything. I've used Giovanni Porta of Porta Lawyers in the past.

    Good luck
    N.

    ps. talk to your accountant about GST implications if you're planning to sell. I understand that even though these are new builds if you hold for 5 years (I think) that you may not have to charge GST on sale...Nick?
     
    Last edited: 2nd Sep, 2005
  7. Bundy

    Bundy Active Member

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    Nigel & NickM,

    Thankyou both so much for you responses. I had actually heard of a deed of partition some time ago, but couldn't find much info on it.

    Will speak to my solicitor and accountant on Monday.

    Presently completing the process of the subdivision for both villas into both names. Then wish to place one villa in each name. The deed of partition should save us a nice sum! :D

    Thankyou, thankyou, thankyou!!!!

    Re GST upons sale - each of us have been living in one of the units since May05. Would we still have GST implications if we sold one of the villas by the end of the year - even though we have owned the original property since 2001?
     
  8. NickM

    NickM Co-founder Staff Member

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    BUndy,
    if it is new residentialproperty for GST purposes , - eg a new construction and you sell within 5 years then you will be obliged to charge and pay some GST.

    I am working on a short, easy to read paper on GST and property.

    NickM
     
  9. mack

    mack Member

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    Location:
    Kambah, ACT
    Hi Bundy
    Try his I found it helpful
    Client contact centre QLD office of state revenue
    PH 1300 300 734
    Good luck
    Mack
     
  10. Bundy

    Bundy Active Member

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    I rang the Office of State Revenue today to canvass them re deed of partition etc.

    Was advised this this concept is applicable in NSW, however not in QLD.

    OSR advised that for us to strata title the properties into joint names and then transfer one property to each of us, we would have to both pay stamp duty on 50% of the value of each villa. :mad:

    Due to the size of the land, we were unable to strata title the land pre the development to possibly reduce the effect of stamp duty.

    Unbelievable!!! What a RORT!

    Hence...........Villas will remain in both names.... will not be donating any further to Mr Beatties' super fund!

    Cheers
    BUNDY
     
  11. OLI

    OLI Well-Known Member

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    1. At what stage do you draw up a deed of partition? Is this done during the original purchase of the land or not until just before you strata title the properties into individual names?

    2. What are the CGT implications of buying as Tenants in Common and then transferring into individual names? Does it help that the individual names are the same names originally listed as Tenants in Common?