When the courts make orders to rearrange ownership of property they do take into account who owns the property and who has paid for it. But they also take into account non-financial contributions.

So some investment structuring strategies could work against you in a family law dispute. One strategy is for spouses to keep finances separate and to buy property in single names. Where X buys a property and Y makes no contribution to the deposit or to the loan, or to the repayments and has never helped in renovating the property etc then the courts are more likely to favour X in such a situation.

There are exemptions for CGT on the transfer of property as a result in a relationship breakdown. If title is transferred CGT may not be triggered now, but the recipient (transferee) will be liable on the full amount when the property is later sold. So as Blackhotel says you have to take into account the future CGT liability on any property settlement.

And, trusts can help in some situations, it all comes down to how they are structured. I think one recent case is Morris v Morris where the spouse attacked a trust of which the husband was a beneficiary, but failed to have the trust assets treated as property of the marriage. it was still a financial resource though.

limumeng wrote:

Hi Terry,
I thought if I hold the PPOR for 12 months, I am not subjected to CGT.Am I wrong ?
Thanks

This statement could be true, but it is not always correct.

A main residence could be exempt from CGT provided certain requirements are met such as:
– not income producing and not able to claim the interest
– moved in as soon as practical after completion
– not claiming another main residence
etc

there is no 12 months rule. You are probably confusing the 50% CGT discount which applies after 12 months.

Mido wrote:

I sign th epre sale 2BR apartment in level 20 with good view, I think I’ve got good deal with price and time frame bcuz I can rent it easy with condition and location and clain it on tax

But will you be able to get finance to settle in 2019?

No, it is probably not a good idea to sell a main residence to pay down investment loans. You will be giving up your only tax free investment and you will be paying tax on the increased income. Plus you will need to find somewhere to live and if you are paying renting you will have to pay that with post tax income.

It will be based on title unless one party makes application for the courts to make a property settlement.

I advise against 99% 1% ownership in most cases. Owning one percent of a property is pretty pointless. Consider the effects on borrowing too.

With a company new investors can be introduced by transferring shares without triggering stamp duty in most cases, so it is more flexible in this regard.

Beware – lots of confusing comments in this section.

1. Don’t draw it down. If you borrow to pay off the main residence loan the interest won’t be deductible and your $120k split will be a mixed purpose loan.

2. With extreme care. If you pay for something with cash and then take money from the loan the interest will not be deductible because you have just borrowed to reimburse yourself. Mixed loan issues too,

You need to pay the vendor directly from your loan account – which may be difficult.
An alternative is to use a credit card to borrow to pay for the items and then refinance this loan with the bank loan. You must not have any other private expenses on the card when doing this – or the card will be a mixed purpose loan.

3. Bloody oath. Have you sought tax advice? Property first used to produce income could reset the cost base to market value at the date it first earns income.

With serviceability it is not a matter of which lender, but the situation and the structure.

Land tax is too complicated to list the differences across all states. Even comparing 2 states is complex.
In QLD each trust could get a separate threshold of $350,000. Same with companies.

The answer to most who ask me should they use a trust to own property is ‘probably not’.

The risk of being sued is overstated by spruikers who try to make money out of selling trusts – most of them unqualified too.

Tenants can and do sue, but it is very rare. I have been investing in property for over 20 years and no tenant has ever attempted to sue me – except perhaps in the tribunal over minor lease disputes. But hold a property in a trust won’t protect the property because they will sue the owner of the property which will be the trustee. Trustee is indemnified out of the trust assets so all the assets of that trust will be at risk – but your personal assets may be at risk.

I think the great danger would come from if you are in business. There are always disputes in business so this can be very risky. But I have been self employed for about 15 years and never been sued. I have had some disputes, but never that serious. But I have sued a client in court myself. That is risky potentially as if you lose you could be up for costs.

I advise on asset protection a fair bit yet I have only seen about 5 or so people end up bankrupt. So it is pretty rare.

Keep in mind that there are other ways to ‘protect’ assets without those assets being held in trust.

Yes valuers actually can tell you what it would have been worth at any point in time.

It could also be exempt from CGT for up to 6 years.

Benny – there is no declaring of which property will be the main residence – until the sale of one of them.