Jump to content

stamp duty sticky situation


  • Please log in to reply
24 replies to this topic

#1 IBakeBoys

Posted 12 November 2012 - 06:14 PM

We're in Vic and looking to purchase our first home. We had started negotiating with the agent on one particular property when the vendor informed them they had decided to put in tenants for 6 months starting the next day (rented privately, not through any agent - you could tell the agent was very taken aback and not at all impressed.  If I hadn't made an offer then they wouldn't have found out until after the tenant moved in the next day)

We currently have a health care card so have an exemption from paying stamp duty. However if they consider the house to be an investment instead of a PPoR then we become liable for stamp duty.

If the SRO allow us to keep the stamp duty exemption, then does that mean that we can't claim any tax deductions for the interest payable on the mortgage until we can move in (ie, to help offset the rent we would be receiving) looking on the ATO website it said that you can claim deductions up until your intention to use the property as an investment changes. Is that a fancy and complicated way of saying while there are tenants there and you're getting rent? Or as we're intending to move in as soon as the tenant is out we're not intending it to be an investment at all, therefore no deductions.

I'm so bummed, we were excited to finally have property negotiations looking like they were going to go in our favour and now theres all this to complicate things even further. I don't even know who to go to for help? I guess I'll be calling SRO and the ATO tomorrow to figure it out? Any advice from property buying veterans so I can start to wrap my head around it before then?

Edited by IBakeBoys, 12 November 2012 - 06:15 PM.


#2 Wyn99

Posted 12 November 2012 - 06:20 PM

Why don't you negotiate a 6 month settlement so it's not an investment property, but your residence. Current owner gets to collect rent for 6 months and you don't have the stamp duty issue or problem of being a landlord for 6 months. Also if the tenants trash it then it's the owner's problem to fix before you settle.

#3 Three Of Hearts

Posted 12 November 2012 - 06:22 PM

QUOTE (Wyn99 @ 12/11/2012, 07:20 PM) <{POST_SNAPBACK}>
Why don't you negotiate a 6 month settlement so it's not an investment property, but your residence. Current owner gets to collect rent for 6 months and you don't have the stamp duty issue or problem of being a landlord for 6 months. Also if the tenants trash it then it's the owner's problem to fix before you settle.

I'd try and do this too.

#4 emnut

Posted 12 November 2012 - 06:34 PM

It at least used to be the case that as long as you move in within 12 months of settlement it is your PPOR so you would still qualify with a 6 month lease.


#5 IBakeBoys

Posted 12 November 2012 - 06:35 PM

That was the first thing we thought of however DP is due for a payrise in January which might loose us the HCC and therefore stamp duty exemption, meaning we'd have to come up with an extra $10 - $15k which we couldn't do, especially ontop of allt he concessions we'd lose with the HCC (kinder fees, gas, elec, prescriptions, rego etc)

I don't mind paying the stamp duty if we loose the HCC, but in this instance it means we'll not be able to afford the house anymore sad.gif

#6 protart roflcoptor

Posted 12 November 2012 - 06:38 PM

Would the rental income impact on your CLB and health care card eligibility? That might be a consideration too.

But yes, you can claim deductions on outgoings necessarily incurred in gaining or producing the rental income if you own it while it's rented out or available for rent. Not capital expenditure though.

eta; wow, didn't realise how many concessions you got with a HCC, being one of the middle income working poor myself.

If you can't afford the house without the HCC, maybe save up a little longer. The mortgage stress if the rates go up could be too much for you.


Edited by ossim roflcopter, 12 November 2012 - 06:42 PM.


#7 Madnesscraves

Posted 12 November 2012 - 06:40 PM

I'd start looking for another house OP sad.gif

#8 IBakeBoys

Posted 12 November 2012 - 06:45 PM

QUOTE (ossim roflcopter @ 12/11/2012, 07:38 PM) <{POST_SNAPBACK}>
Would the rental income impact on your CLB and health care card eligibility? That might be a consideration too.

But yes, you can claim deductions on outgoings necessarily incurred in gaining or producing the rental income if you own it while it's rented out or available for rent. Not capital expenditure though.


The rental income would loose us the HCC and change our FTB etc but that would only be after settlement, ie. after we get the stamp duty exemption or not. But we're teetering on the edge of loosing it now anyway so I'm about 90% sure we'll loose it in the new year so that doesn't bother me too much. And that would be spread out over the year, not just hit us in o ne lump like loosing the exemption would. Just wanted to jump into the market while we had it (exemption) if possible - prices are down, stamp duty exemption and cash in the bank are working in our favour - apprentice wages and 4 kids not so much! Should have known it wouldn't be easy!

We're still way under what we can service on a loan, an in addition, DP will be qualified in 12 months so we'll see a *ahem* significant payrise then! SO I don't think mortgage stress will be a problem. Banks are pretty strict with what they think it costs to raise 4 kids and we do it much cheaper than they claim the minimum is - economies of scale!

Edited by IBakeBoys, 12 November 2012 - 06:49 PM.


#9 Phascogale

Posted 12 November 2012 - 08:09 PM

I'd also be looking for another home.

Rental properties can become a headache unless you are prepared.  It's also a private rental, not one going through an agent unless you change that once you become the owner.  That might be a headache in itself.

This may not be the house for you.

#10 libbylu

Posted 12 November 2012 - 08:14 PM

Since when does having a HCC exempt you from stamp duty......I never heard of that?!?  Is that the case even if it is not your first home..i.e. if you are selling your home and buying another so it will still be your principal place of residence?

Edited by libbylu, 12 November 2012 - 08:15 PM.


#11 Fossy

Posted 12 November 2012 - 08:17 PM

Can you reduce your offer to cover the stamp duty?

#12 Lees75

Posted 12 November 2012 - 09:42 PM

I could be totally wrong.....
But if the potential rental income (minus allowable deductions) puts you over the limit for a health care card that means you weren't really entitled to the HCC all this financial year, therefore not really entitled to a stamp duty exemption in the first place.




#13 Rubixx

Posted 13 November 2012 - 01:22 AM

From the SRO (stamp duty) perspective, you have up 12 months from the date of settlement to move into the property. Yes, it will considered an investment property initially but the said property is the first home that you have purchased as long as you move into the property within 12 months. So you should still be able to meet the requirements for the stamp duty exemption.

Also, isn't the stamp duty exemption applicable from the date of exchange? So at the date you entered into a contract for sale, you would be holding a HCC. So in this instance, the exemption should apply.

Edited by Rubixx, 13 November 2012 - 01:23 AM.


#14 knottygirl

Posted 13 November 2012 - 04:28 AM

id be looking for another house.  you are going to end up owning a house with private renters in it?  what if they refuse to move?  or dont pay their rent?  you could be left with a big problem.



#15 2bundles

Posted 13 November 2012 - 05:16 AM

I agree with Rubixx. Usually it is the contract date not the settlement date that you officially purchase a property.

#16 MrsLexiK

Posted 13 November 2012 - 05:43 AM

I would look for another house. If you are relying heavily on the HCC how will you service both rent? And a mortgage. Your going to lose the HCC once you settle as the income from the rent will push you over the edge, but you will still have to service the loan and any rent you are paying now. The rent you receive may not line up when your payments are due for a start. You may have to hold off buying until your DH is qualified and you can afford the extra $10k (are you getting first home owners grant? We used that to pay the stamp duty)

#17 Nofliesonme

Posted 13 November 2012 - 06:03 AM

It doesn't sound to me like you are entitled to the HCC because it's a financial year thing. Therefore meaning you would still need to pay stamp duty. Nextly when we had a hcC we ever got an exemption from stamp duty........Just read your in VIC but I don't believe you qualify or your HCC

Edited by thunda, 13 November 2012 - 06:05 AM.


#18 mumofsky

Posted 13 November 2012 - 06:22 AM

In my case I was exempt but had to be on a particularly low income at the time and classified as a pensioner back then - it wasnt just all HCCs. Have you gotten really strong advice that its your type of HCC?

#19 SaintJoe

Posted 13 November 2012 - 03:04 PM

QUOTE (knottygirl @ 13/11/2012, 05:28 AM) <{POST_SNAPBACK}>
id be looking for another house.  you are going to end up owning a house with private renters in it?  what if they refuse to move?  or dont pay their rent?  you could be left with a big problem.


They are legally required to once the lease is up and there are legal ways to do this. They would also have access to the bond for missed payments. Insurance would also cover them with any payment or damage problems.

Lots if people purchase homes with tenants. It's common and not that big a deal.

#20 Phascogale

Posted 15 November 2012 - 03:10 PM

QUOTE
Lots if people purchase homes with tenants. It's common and not that big a deal.
That they do, however most of the time you are aware there are tenants before you put in an offer.  There is a very big difference to someone getting a renter for the 3 months (or whatever) it takes to settle because they need somewhere to stay for a few weeks for whatever reason to getting renters in with a 6 month lease.  As they have a 6 month lease you cannot kick them out until the lease is finished unless they choose to go early (you may be able to get them to move earlier with the right incentives).

OP, what sort of settlement did you want?  If you wanted a 6 month settlement then the renters being in there isn't an issue because they rent doesn't go to you, it goes to the current owner until settlement.

The issue that you might have is if the renters take their time in getting out and you need to move in.

#21 Mrs Mc

Posted 15 November 2012 - 04:05 PM

What type of lease do they have - have they even signed one?  i dont know the rules in VIC but in SA some leases have a 30 day or 60 day notice for the tenants to move out.

I would be checking the lease.  I would also be seeing if they can legally put tenants in there, in the middle of offer and acceptance.

Have you spoken to the tenants, they might be nice and willing to move

#22 PrincessPeach

Posted 15 November 2012 - 04:31 PM

I'd either find a different place - or have settlement in 6 months when the tennants move out!

I am not exactly sure how legal it is though to have the house on the market & at contract stage & then all of a sudden decide to put tennants in, without informing the selling agent.

#23 JRA

Posted 18 November 2012 - 03:25 PM

QUOTE (**myboys** @ 13/11/2012, 03:04 PM) <{POST_SNAPBACK}>
They are legally required to once the lease is up and there are legal ways to do this. They would also have access to the bond for missed payments. Insurance would also cover them with any payment or damage problems.

Lots if people purchase homes with tenants. It's common and not that big a deal.



It is not a big deal, BUT although there is landlord insurance and bond etc, and legal ways to move people, if you have a bad tenant it can cost you a lot of money, and that is something the OP needs to consider when looking at the economics of it all

#24 ms flib

Posted 18 November 2012 - 03:34 PM

I would be removing the offer. Have you committed yourself officially - signed papers and paid a deposit of any amount?

I would let the agent know that your offer only stands with vacant possession. Whilst you certainly can buy a house with ongoing tenants, it is a less desirable purchase. Considering that the vendor will receive 6 months rent, I would be negotiating a lower price.

But really I think this is a warning sign - get out of this while you still can!

#25 Charri36

Posted 19 November 2012 - 05:02 PM

QUOTE (ms flib @ 18/11/2012, 01:34 PM) <{POST_SNAPBACK}>
I would be removing the offer. Have you committed yourself officially - signed papers and paid a deposit of any amount?

I would let the agent know that your offer only stands with vacant possession. Whilst you certainly can buy a house with ongoing tenants, it is a less desirable purchase. Considering that the vendor will receive 6 months rent, I would be negotiating a lower price.

But really I think this is a warning sign - get out of this while you still can!


Agree ! Get out now! They are taking advantage of you. The seller sounds like a tool. You need to get your lawyer or settlement agent to look over the offer - different states have different rules regarding offers. If you stated vacant possession, and it's not - the offer is over. Please be very careful what THEIR agent tells you, you need someone working for YOUR best interests, not the sellers, not the agent - as they still get their fee, and leave you with the mess.

I've bought and sold a few place, I wouldn't touch it.

ETA - You also need to talk to your accountant to find out the pitfalls "if" you do go ahead. If it's tenanted, there is no way in hell I'd be having a 6 month settlement, if you looooove the house and it's undervalued - and you get the OK from the bank (who will asses your loan differently as it's a rental) and all the sums work out, it may be OK, saying that though you will need a fair bit of capital upfront to pay insurances etc. Are you except from Stamp duty due to being a first home buyer or is it due to the HCC.

If you don't know much about accounting/buying and selling properties then this situation can get pretty messy, and don't forget you'll be on the receiving end of it all.

Edited by Charri36, 19 November 2012 - 05:09 PM.





1 user(s) are reading this topic

0 members, 1 guests, 0 anonymous users

 

The myths and truths of gender swaying

Here are a few popular methods hopeful parents-to-be use to try to get a baby of their preferred gender – and what an expert says about whether they really work.

10 easy DIY Christmas decoration ideas

It's officially time to get into the Christmas spirit. Why not branch out when you put up your tree this year and add a personal touch with a few DIY decorations? We've found the perfect easy-to-make ways to put more festive fever into your home.

The dangerous new trend of glucose challenge test refusal

A dangerous trend is seeing more mothers-to-be declining a relatively simple and painless test to check for gestational diabetes.

Office of Fair Trading reveals naughty toys ahead of Christmas

The Office of Fair Trading has pulled seven toys from shelves ahead of Christmas after they fail safety tests.

Video: Baby boy's trouble with twins

These twin girls will no doubt have fun fooling people in years to come, but nobody will be as confused as baby Landon.

Long-term reversible male contraceptive on its way

Men could soon have access to an injectable long-term contraceptive which works in a similar way to a vasectomy but promises to be easily reversed.

'I tried to kill my baby': one mum's story

After bathing and dressing her three-month-old son, Amanda had a rare moment alone with her baby.

Attack of the 'mummy brain'

I feel that almost every day, someone in my life - be they a friend, family member or complete stranger - feels the need to excuse my behaviour as I have other things on my mind.

Mum of baby who fell ill after drinking raw milk speaks out

A Melbourne mother has described how her son turned grey when he became seriously ill after drinking raw milk.

Australian divorce rate lowest since 1976

Modern newlyweds are now well into their 30s and marriage still offers something powerful a new book argues.

The aftermath of a traumatic birth experience

In Australia, 30 per cent of women find their birth experience traumatic, with 6 per cent going on to develop post traumatic stress disorder (PTSD).

Young mum burns 'from inside-out'

A young mum is in intensive care after she took a friend's antibiotic and wound up with an ailment that is burning her body 'from the inside-out'.

The disagreement that can break a relationship

If he doesn't change his mind, all I can hope is that I will. It would be a waste to spend the rest of my marriage mourning a baby that never was.

Co-sleeping or no-sleeping? Mum videos worst nap ever

One mother's futile attempt to sleep in caught on camera in a hilarious - and very cute - video.

Why children misbehave during the festive season

While we all like to imagine the holiday season as being a fun, loving and bonding experience; often our reality is quiet different.

I was fat-shamed by my doctor

The fear of being weighed is the most significant factor in women cancelling medical appointments - and now weight-shaming has happened to me.

End of an era: no more childcare

As we reach the end of 2014, we're closing the book on many things for another year, most notably childcare. Our last child has attended childcare for the very last time.

The 7-year itch is more like the 10-year itch: study

Contrary to popular belief, making it past the seven-year mark doesn't mean your marriage will be smooth sailing from there on.

Stop telling us that parenting gets harder

I’m sure that parenting will get harder. But life isn’t exactly smooth sailing for many of us right now, either.

Should children be forced to sit on Santa's lap?

We teach kids it’s okay to say no if they don’t feel safe, so why do some parents force their children to climb in to Santa's lap?

Download now: Essential Kids Activity Finder app

Got bored kids? Quickly find the best activities for kids wherever you are in Australia with the Essential Kids app.

 
Advertisement
 
Advertisement
 
 
 

What's hot on EB

Baby born weighing almost 14 pounds

Yes, the bouncing baby girl was born by caesarean section. And mum says no more kids.

The dummy debate

I'm the first to admit that when I used to see tiny babies with dummies in their mouths, I thought "Hmm, lazy parenting." And now I apologise.

'I thought I was an only child'

Imagine meeting your double at a school sports event, or regularly being mistaken for someone you haven't met. Separated twins Margaret and Joy tell their story.

Mums reveal their nappy bag essentials

Ever wondered what other mums carry in their nappy bags? We have, so we asked mums to tell us their must-have nappy bag items.

Toddler died because he wasn't given antibiotics soon enough

A 15-month-old boy would almost certainly be alive today if doctors had given him antibiotics sooner, a coroner has ruled.

VIDEO: moment a toddler falls on to train tracks in Melbourne

Shocking footage has emerged capturing the moment a pram carrying a toddler rolled off a platform and onto train tracks in suburban Melbourne.

Sold on natural birth? Read the fine print

In the excitement and anticipation of a first pregnancy, I ignored the fine print: some women, some of the time.

Child with alcoholic mum who drank while pregnant won't win pay-out

A young child is not entitled to criminal injuries compensation after her mother drank excessively while pregnant.

Superbugs killing India's babies, posing wider threat

A deadly epidemic that could have global implications is quietly sweeping India, tens of thousands of newborns dying because antibiotics no longer work.

Can you teach a toddler to sleep in?

Parents share their tips on getting their early risers to sleep in, even for just a little bit longer.

Keeping your relationship on track as new parents

About 70 per cent of couples experience a slump in their relationship within three years of having a baby. Here's how we tried to get back on track.

America's favourite baby names of 2014

Americans are turning to television, Netflix and sports for ideas for what to name their wee ones.

Carers admit to force-feeding children

As Sydney grieves the loss of Sydney siege victims Katrina Dawson and Tori Johnson, reports have suggested that both died as heroes.

 

How many weeks til Christmas?

On your To-Do list

Get the "Santa" shopping done without the kids in tow.

 
Advertisement
 
 
Essential Baby and Essential Kids is the place to find parenting information and parenting support relating to conception, pregnancy, birth, babies, toddlers, kids, maternity, family budgeting, family travel, nutrition and wellbeing, family entertainment, kids entertainment, tips for the family home, child-friendly recipes and parenting. Try our pregnancy due date calculator to determine your due date, or our ovulation calculator to predict ovulation and your fertile period. Our pregnancy week by week guide shows your baby's stages of development. Access our very active mum's discussion groups in the Essential Baby forums or the Essential Kids forums to talk to mums about conception, pregnancy, birth, babies, toddlers, kids and parenting lifestyle. Essential Baby also offers a baby names database of more than 22,000 baby names, popular baby names, boys' names, girls' names and baby names advice in our baby names forum. Essential Kids features a range of free printable worksheets for kids from preschool years through to primary school years. For the latest baby clothes, maternity clothes, maternity accessories, toddler products, kids toys and kids clothing, breastfeeding and other parenting resources, check out Essential Baby and Essential Kids.