I wouldn't take early settlement for this reason. It is better to have the vendor keep this potential problem just in case. Some people are having problems finding accomodation for various reasons and some tenants just refuse to leave.

It may reduce the tax – you would have to do the figures. It would also help you manage the CGT as there are other ways to reduce your overall taxable income such as prepaying interest, contributing to super etc

I think the contract would be still binding in NSW on the seller. I would have to look at the terms again and haven't got one handy..

Good Tyson – better late than never!

I think you will have to do the sums. It may cost you XX now, but it will save you ZZ per year in tax sort of thing. You then have to decide is it worth doing.

You could possibly lease the property to a trust and then allow the trust to on lease it at higher rates. But you would have to do everything at arms length for tax reasons.

What state?

If NSW, then under the standard contract the seller can terminate it if the deposit is not paid (cl 2.5). But the contract would still be binding.

Colin

An adult can acutally earn up to $16,000 pa tax free when the low income tax rebate is taken into account. This will raise to about $20k next year (or the year after?). This makes using a discretionary trust very attractive now.

Hmm

There is not CGT on the family home. Even if you inherit it you will not have to pay CGT unless you rent it out and later sell it. Stamp duty exemptions would apply to the transfer post death too.

If you buy the house now you will pay stamp duty.

Anyway,
1. Yes
2. You would still have a debt to the estate. But the parent could forgive the loan in their will
3. wait?

I don't know about that.

You have a mxied purpose loan now, but the ATO may allow an exception where money is recouped and repaid and it could be possible:

see paragraph 17 of TR 2000/2 Income tax: deductibility of interest on moneys drawn down under line of credit facilities and redraw facilities
http://law.ato.gov.au/atolaw/view.htm?docid=TXR/TR20002/NAT/ATO/00001

If your accountant is giving the go ahead then make sure you get it in writing.

Sounds very complex. Her not being able to qualify for the loans makes it even harder. What about if she just sells "her" property and takes the proceeds. That would save you from having to guarantee the loan (but I guess she is probably living in this one).

Not many ways to avoid CGT.

At least you are on a low income, so the effect will be less. If you have a $200,000 gain then take off buying and selling costs, say $40,000 and then apply the 50% CGT discount = a taxable gain of $80,000 this would be added to your other income.

Selling to a trust won't assit with this, CGT will still apply at market rates, stamp duty as well.

Any loss by the trust will be trapped in the trust, land tax may also be payable depending on the state you are in.

It may still be a good idea though as it will release equtiy which you can use to pay down non deductible debt. But get advice first to make sure it passes ATO scrutiny.