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risky I think
When you sell you eat up equity with the agent fees and then when you buy again you have stamp duty, conveyancing, etc So you might lose about 8% of the value.
You also have to consider the loan. Could you qualify for another loan again?
Think about the effect on the pension too – could you be over the assets test if you downsize?
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Ben
You could leave it in other investments but you would soon need to liquidate those so you could have the cash ready for settlement. Lenders will want to know where the funds to complete are coming from.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
I am a tax lawyer with a credit licence. with lots of experience in this area. You will need to apportion the interest if you do not split, furthermore, you will be paying back deductible debt with every deposit into the loan.
Splitting a loan means making one loan into 2 (or more).
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This reply was modified 3 years, 8 months ago by
Benny. Reason: Editing as per Terry's correction - for clarity
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
If iti s a $1mil loan then the interest will not be deducitble in full. 80% would potentially be the max
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
I did something similar once. I had the deposit invested in shares and the signed a contract, coming up to settlement I was trying to wait to sell at a peak. and settlement was approaching so i had to bite the bullet and sell at a price less that I could have a few weeks prior.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
So if I move back into the property and it becomes my principle place of residence and put 800k into the redraw then redraw to buy a new property for $1m (80% LVR). Are you saying none of the interest is deductible against the rent of the new property? The ATO tax guidance appears to outline it will be. How much will be tax deductible?
Not sure how you get that idea from my posts. If you split the loan and do it properly 100% of the interest could be deductible if the borrowed money is used to buy an income producing property as per s8-1 itaa97
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
probably best to speak to a lawyer as a trust is a legal device, a relationship in equity and only lawyers can give legal advice. Many can also give tax advice.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
If I take the 800k and put in the redraw then take it out to buy a new property, will the full 800k be deductible?
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No
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
It could be anything depending on the circumstances. It will depend on a lot of thing – ability to claim the main residence exemption, land tax, intention with the front property, stamp duty laws, asset protection, estate planning etc etc
Once you determine which legal owner then you have to work out how to structure the structure. If it a company acting as trustee of a discretionary trust, then how to you fund the deposit, how about the remainder, who should be shareholder, director, terms of the trust, should the trustee be excluded as a beneficiary, should there be different capital and income beneficiaires, should default beneficiaries be included, if so what about the asset protecton issues etc
You need specific legal and tax advice.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Actually you are probably best to work out hte portions of the mixed loan now, then split, and then do the above as this might help you claim the interest on the $200k if you were to rent the current property out.
Seel specific tax advice
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
The loan relates to 2 or more uses.
Your loan is current $1mil right?
Part of this relates to the purchase of the current property and part relates to not much, you borrowed and put in an offset mixing with cash.
If you put $800k into a $1mil loan the balance will be $200k, but this balance partially relates to the purchase of the property and partially to the mixing in an offset account.
It will be mixed furhter if you pull $800k out to invest. You could only claim part of the interest.
But if you split the loan and paid $800k into an $800k split and redrew to invest the interest could be deductible in full, if you do it right, as there would be no mixing then. 100% of it was used for the 1 investment.
It is not really relevant if you move back in or not.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
I don’t know anything about the UK
There is no GST difference between ownership entities – in this situation, but there are a lot of other tax and non tax differences.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
You now have a mixed loan, so a few issues there.
If you pay the loan down by $800k it will be mixing it furhter so you should split it. Pay $800k into a $800k split and redraw it and invest it. If the investment is expected to produce income, such as rent, the interest on this split would generally be deductible.
Deductibility is determined by the use of the money borrowed, not the security. So if you borrow another $640k and invest it the income will be deductible. THe main criterisa is that it needs to generate income.
Seek specific tax advice.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
This is something you would need specific legal advice on. It could be individual, company or trustee depending on the circumstances.
Ownership entity won’t change the GST outcome either. Certainly GST can apply to the sale of vacant land, especially if you subdivide and sell as you will be conducting an enterprise. Have a look into the margin scheme to reduce any GST
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
using a lawyer over a solicitor?
Lawyers and solicitors are basically the same thing. Lawyers is a generic term which includes both solicitors and barristers
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
try Mike at http://www.propertytaxsolutions.com.au in melb.
If you have made money you could sell and repeat the process and potentially make more (by getting more efficient). Next time consider using a company to hold the property perhaps.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Commercial loans can be done in individual names
If you are asking about ownership structure then seek specific legal advice as many issues consider. Transfer of title or declaration of trust will both attact duty and CGT to it pays to get advice.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
As a general rule you should never pay a deposit on an investment property when you have non-deductible debt
Borrow against your main residence for the deposits
You should also try to shift the investment debt to owner occupied rates as well as investment debt generally has a higher rate.
Think of the sale of the main residence as a strategy too. It’s the only tax free appreciating asset that you can own so one strategy is to wait for some growth to kick in and then sell, tax free, and move into an investment property – which might have a small LVR by then, pay off the remaining loan and still have enough left over which you can store in offset accounts on the investments and slowly draw down on for some tax effective retirement.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
It might be possible to go to separate lenders – might be hard if one contract of sale though
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
There is a simple way to increase deductions and that would be to borrow 100% for the construction. wait till titles are separated, split the loan and then pay down the non-deductible portion.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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This reply was modified 3 years, 8 months ago by
