Forum Replies Created
1. Not really because rental income would need to be paid if you didn’t live in it. very ball park figure though.
2. title will show legal ownership %. If this is to be varied due to some sort of agreement the terms of that agreement will need to be evidenced.
If you meet a condition of release you could possible access super.
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 don’t mention if your mother has passed away or not.
1. You won’t need a deposit if you are inheriting your mothers share of the property. As a guide roughly 6 times your annual gross income will be the max you could borrow.
2. Has probate been granted? Who is the executor?
3. Yes, ask for the terms of the agreement and a work out of their reasoning.
4. Legal advice might be a good idea as would credit advice if you are getting a loan.
5. Yes, you could do a few things potentially.
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
Could be a ruse to get you to lower the price.
You could either
a) reduce the price by $25k
b) stand firm
c) lend them the money, or
d) meet half wayYou need to consider whether you could find another buyer for the same or more.
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
Forgot to add, these days brokers generally can’t even submit their own loans.
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 became a broker because I wanted to get paid for my own loans. But these days it would cost you around $10k to $20k to become a broker plus the ongoing costs would probably make it not worth your while unless you wanted to start a business.
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
Well, the broker should give you reasons why you should do what they are suggesting and these reasons should be logical and backed up with reasons
e.g. why should you avoid cross collateralisation of securities? Because it gives the lender more power when things go wrong. This is because the lender will have 2 securities for 1 loan. Also it is totally unnecessary with the same amount of borrowings being achievable without crossing.
Lender choice is more subjective and the effect if you get it wrong is not so bad as you could move across to another lender (if can still service!).
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
my hope of finding a mortgage broker I can trust has still not been fulfilled. I’m now tempted to go back to my original strategy of dealing direct.
Are you saying you can’t trust any of the 5 or so brokers who have replied above?
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
11 Strategies for when you move out of the PPOR and keep it
There are several things that can be done to improve the tax situation of moving out of the main residence and into a new main residence while keeping the old main residence and renting it out. Often there will be large amounts of equity in the original property while the new property will be purchased with a loan and it will have non-deductible interest payments. On top of it the rent from the old PPOR will be taxable with little to deduct!
So here are some strategies:
Strategy 1: Sell First property
If you sell the first property you can then use the proceeds to pay down the non-deductible debt on the second property and then borrow to buy another property for investment.
Spouse A owns 100%
Spouse A sells to a stranger
Or
Spouse A and B own 50% each
Spouse A and B sell to a stranger.
Strategy 2: Sell First property to spouse
If the first property is owned solely by Spouse A it could be sold to the Spouse B.
Spouse A owns 100%
Spouse A sells to Spouse B
Spouse B owns 100%
This will allow the non-owner spouse to borrow to buy the property which will then be rented out. The interest on this loan will be deductible. The advantage here is that there would be no agent’s fees and the property can remain in the family.
The added advantage is that duty may be exempt in certain states – this needs legal advice. The property may also be exempt from CGT as well.
Strategy 3: Sell share of the property to spouse so there is one owner
Where the property is held jointly it may be possible for 1 of the spouses to sell their share to the other spouse so that the end result is that there is 1 owner.
Spouse A and Spouse B own
Spouse B sells 50% to Spouse B
Spouse B becomes sole owner
This can also be done where the ownership percentages are not even
Spouse A owns 80% and Spouse B owns 20%
Spouse B sells the 20% to Spouse A
Spouse A becomes sole owner
The purchaser would borrow to buy and thereby increase deductible interest while money release is used to pay down the new loan. Similar to Strategy 2.
This may also be exempt from duty in certain states but subject to duty in others.
Strategy 4: Spouse 1 Sell 50% to Spouse B and later sells other 50% to B
Similar to Strategy 3 above, Spouse A sells 50% to Spouse B now. The house is then jointly owned. Spouse A then sells the remaining 50% to B – just after or potentially years later.
Spouse A owns property 100%
Spouse A sells 50% to Spouse B
Spouse A and B become owners 50% each
Later
Spouse A sells 50% to Spouse B
Spouse B becomes sole owner
The advantage with this is reduced stamp duty in some states such as NSW. Instead of paying duty on 100% of the transfer you would only pay duty on 50%.
See Tax Tip 50: Minimising duty on Spousal Transfers Tax Tip 50: Minimising duty on Spousal Transfers
Strategy 5: Sell to a related trust
This is more complex strategy and there are many other issues to consider.
Spouse A and B own
Spouse A and B sell to the AB trust
AB Trust becomes owner
AB Trust borrows to acquire the property and would be able to claim the interest on the loan used to acquire the property as a tax deduction.
Spouse A and B are left with a pile of cash which they use to pay off their new PPOR debt.
This would be a CGT event – but if the house was the main residence it may be exempt from CGT in full. It would likely be subject to stamp duty though.
Strategy 6: Sell to a fixed unit trust with the original owners borrowing to buy the units
This strategy will incur stamp duty, but it allows the property to be retained and for negative gearing benefits to be achieved.
Spouse A and Spouse B jointly own a property
Spouse A and Spouse B sell to the AB Fixed Unit Trust
The trustee of the AB Fixed Unit Trust purchases the property
Spouse A and B borrow to acquire units in the AB Unit Trust
Because they have borrowed to acquire units which will produce income the interest on this loan will be deductible to both A and B.
If the trust qualifies there will be land tax savings too in some states. In NSW land tax could be assessable to the owners of the units so spouse A and B will get the land tax threshold.
Legal advice is essential for this complex scenario as are private ruling applications for both OSR and Land tax. I have received positive rulings for this done in NSW.
Strategy 7: Debt Recycle A
Use the rental income from the first property to help pay down the loan on the new property.
The original property should be positive cash flow as it would have low debt. This cash flow can be used to assist in the payment of the loan for the new PPOR.
The downside of this approach is that the income from the property will be taxable and the interest on the new PPOR loan will not be deductible. But you avoid the costs and hassle of transferring title.
Strategy 8: Debt Recycle B
Use the rental income as above. But access the equity to buy another property. After capital growth has occurred sell the other property and pay down the non-deductible debt
Strategy 9: Debt Recycle C
Once you move out you start borrowing to pay for expenses associated with the property – rates, insurances, repairs etc. Everything except for interest on the loan – but this may even be possible in some circumstances.
Strategy 10: Debt Recycle D
Pay down the new PPOR as quick as possible and borrow to buy income producing assets such as shares. The income from these assets can then be used to pay down the PPOR debt even more and more income producing assets purchased.
This may be done on using a loan secured by the old PPOR too. Security for the loan doesn’t matter, what matters is that you use the debt to pay off the non-deductible debt quicker.
Strategy 11: Planning from the beginning
If you are starting out into a PPOR then simply plan ahead. You may want to consider:
– Owning the property in just 1 name as this will allow the sale to the other spouse down the track;
– Borrowing 105% from the start as this will allow a higher loan to be retained and this will improve deductions once you rent the property out;
– Borrow on an IO basis as this will keep the loan balance high;
– Borrow to pay for all repairs and maintenance;
– Borrow to pay for property related expenses such as rates, insurances etc
– Capitalise interest where appropriate (get 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
No work arounds I’m afraid other than transferring title. I will post below an article I have written on this topic
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 thought he was borrowing to buy a house to live in?
If he borrows for another investment property the interest could be deductible.
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
Terryw,
even if he created a new loan on the current IP, that would be deductible wouldn’t it?
its not mixing the loans, its creating a new one at the full loan amount? that way the interest is deductible?
or am I missing something.No the interest wouldn’t because the use of the funds is for private purposes. security for the loan doesn’t matter.
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
Sorry I read it the other way.
If can still and should be structured like I wrote but the interest on neither loan would be deductible.
The amount of deductible debt won’t change and would be limited to the interest on the $120k loan (at most).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
borrow against your existing house at the same bank for the deposit and costs. Make sure this is done via a separate loan.
Then borrow 80% secured on the new property, ideally at a separate bank.
Result = 105% loan without cross collateralising securities giving maximum asset protection and deductibility of interest.
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 are 2 aspects to consider
a) making the property your PPOR for land tax – which requires you to live in it for 6 months prior to the assessment date -30 Jun I think, so you would need to move in by 30 Dec and live there continuouslyb) The absentee person test, probably won’t apply if you are living in the property for 6 months as that will mean you are in Australia and unlikely to be an absentee
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
Well your early retirement has probably been derailed now
You need to look at the definition of ‘absentee’ in the land tax act and try to make sure you don’t meet this as your land tax bill will go through the roof.
Absentees are taxed like trusts. the threshold drops from $600,000 to $350,000, the rate is higher plus there is a surcharge on top 1.5% pa of land value
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
what states are the properties in? Hopefully not QLD!
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 poor wording but ‘you’ cant purchase property with your super, the trustee of your SMSF can though.
But I agree with Richard – why would you want to cause the trustee to do that? Unleveraged property has a low return, could the money be used elsewhere more effectively?
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
Generally, travel costs are not deductible for property
any legal costs could be a capital cost but as there is no capital gains tax event I don’t see how you could claim these either.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
Generally there is no different treatment between tenants in common and joint tenants for stamp duty. JT are considered to be the same as TIC in equal shares.
I don’t think there would be any difference with first home duty concessions either.
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
In an ideal world you would hold each property under a separate trust, but you have to consider administration and fees. However in QLD it can work out cheaper due to the land tax savings.
Not sure what you mean by a piggy bank trust, but I sometimes recommend clients gift to the trustee of one trust and have the trustee of the second trust borrow this money – or even the individual borrow the money back. I call this trust the banking trust which may be the same thing.
Bucket companies – I often recommend, or structure so you could add one in later.
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
