Acreage Property Purchase

I have a question, can someone please answer it urgently. I have put an offer for a 300 acre rural property in nsw. I am concerned if in the future I sell it in few years time, then I will pay cgt.

Could you please advice me the best way to purchase this property through example principle place of residence, or discretionary trust, etc.. Also I am thinking that when I die my childrens don't have to pay cgt when they inherit the property if i don't sell it. Do you suggest to buy through "property investors trust" as suggested by this article- http://www.propertyupdate.com.au/articles/1/1/Should-A-Property-Be-Held-In-A-Trust/Page1.html

many thanks, meiki

Discretionary trusts are great because you don't have to change ownership of the property when you die and thus do not pay CG tax. You can state yourself as the only named beneficiary and then have your relatives in 3 directions as unnamed beneficiaries.

This means when you die, you can simply change the trustee, and your children can take control of the property.

As for not paying CG tax. The only method I know is establishing this place as your principle place of residence (PPOR). Putting it in a trust does not cancel out capital gains tax as far as I am aware.

Ryan McLean
http://CashFlowCapital.com.au
Positive Cash Flow Properties Are Just a Click Away

Ryan McLean
http://CashFlowInvestor.com.au
Positive Cash Flow Properties Are Just a Click Away

Dear Ryan,
thank you for the reply.

can you please tell me, in case my property is not in a trust , when i die, my 300 acreage property pass to my children without cgt, if i mention it on my will? or my children will have to pay cgt when it is passed to them?

i understand from your reply that in a trust my children will not have to pay cgt.

Some people say life of a trust is 80 years only, where as property investment trust (PIT) has no life, which means goes on for ever, is that true?

i am also thinking if in near future (2-4 years) if i have to sell my property, i will get 50% cgt discount if ppor and not in a trust.

whereas in the trust i will have no gain, and the sale will incur cgt at its full.

i am also a high income earner (100K).

the bank is lending me 50% money to buy the property, which is a rural property, can i use the loan and pay interest and claim it on my salary like negative gearing? there is no dwelling on property.

your insight will be very helpful.

regards, meiki

Sounds like you need an adviser or a good accountant ...

Hi Meiki,

TO be your PPOR you have to live there - which is a bit hard on a vacant block. Great income you are on - so as Wealth says I reckon allocate a couple of hundred bucks of it towards seeing a savvy accountant or qualified tax advisor.
All the best.

CGT is exempt for main residences up to 5 acres only. So your property will be subject to CGT even if you live in it. It might be best put in a trust - but consider the land tax side of things too. This is complex as there are exemptions for primary producers etc.

Usually when you die your property is left to a beneficiary in your will. There are usually no stamp duty of CGT when it is transferred, but there will be CGT when it is onsold by the beneficiary. They will usually be considered to have acquired the property at the price you paid for it, for CGT calcs.

All states in Australia have laws against perpetuities, except SA. So if you set up your trust in SA it can last longer than 80 years - forever possibly!

Trusts don't usually pay tax. Any CGT will be passed on to the beneficiaries and if a beneficiary is a natural person they should be entitled to the 50% discount (if held for 12 months or more). If a company were to receive the CG, then no discount.

If you buy the property in your own name you may be able to claim the interest against your personal income, but this will depend on lots of factors such as what the property is being used for, or your intentions - eg to construct etc.

Terryw

Withdrawn as Terry had already answered the question.

Paul & Karen Dobson
Vendor Financiers
http://www.jvpropertypartners.com.au
http://www.vendorfinanceinstitute.com.au
Phone: 0447 973 235

Talk to us about Vendor Finance Training Joint Ventures.