A trust needs a trustee. This can be one person, two or more people OR a company or 2 or more companies OR 1 company and  one person etc etc.

Having a company as trustee is safer as it distances yourself from the trust assets. The company will only act as the owner of the property on behalf of the trust. So all the rent will go to the trust. The trust can then distribute any profit (if any) to the beneficiaries – who are not necessarily the shareholders of the company.

Keep in mind that, if there is a loss then this loss cannot be distributed. ie you cannot use the loss to reduce personal tax.

If you wish to transfer your property to the trust, then you must 'sell' it. Which means stamp duty will be payable on the purchase by the trust. New loan will be needed too – and probably exit fees as well as legals on the transfer.

big risk. if they damage the property you will be responsible. If you understand this, then good idea.
I know of people doing it in the inner city and making $200 approx per week per unit.

It is possible for claim the interest on that 10% withdrawn from the main loan. But it is very messy and not the ideal way to do so. It will create future problems trying to work out the claimable portion because it is one big loan.

The ATO considers each subsequent repayment into that loan as coming off the main loan and IP loan in proportions to the original amount. confusing?

eg. $100,000 loan, balance is $90,000 and you take out $10,000 for an IP. 90% of the interest on this loan is non-deductible and 10% is deductible.

If you were to deposit $1000 in the future 90% of this would come off the main part and 10% off the IP part. if you were to make another deposit, then the same.

After 10 deposits it can get very messy.

Ideally you want the IP portion to stay at interest only and all the repayments to go to the main PPOR portion to repay non-deductible debt faster.

Therefore a separate split is much better.

Hi Don

I agree with Richard. These days the lenders will not like this sort of deal.

What you are doing is essentially borrowing the $125,000 from the vendor. So I would suggest you need a separate contract for this and leave the contract of sale for the property as is.

Maybe a verbal offer with an explanation is better than a written one. And you should be using a solicitor to do it in case your offer is accepted.

If the woman paid you directly, then i believe she has a strong case for having a beneficial interest in the property – as these funds were directly used to purchase the property.

And Pully makes a good point about the mental illness and capacity.

Very messy, sorry to say I don't think it looks good for Websa. Please seek legal advice asap.

Hi Angela.

Yes, units are consider property of the owner. so not asset protection. An interest in a discretionary trust is not property until a declaration of distribution is made. There have been some exceptions in a recent case (Richstar), but there were cases after this that did not follow that decision. Anyway a DT is the safes way to go, but lack of negative gearing can be a problem. A way around this is to try to divert some other income into the trust to offset the loss.

Yes, i agree. You could set up a trust. Discretionary or bare trust, depending on what you want to do in the future – but the trustee would be on the loan and to take the risk. You can change trustees later on with only nominal stamp duty -when you reach 18 and qualify for a loan.

Yes, in NSW you will be charged stamp duty on the value. OSR may even require you to get a valuation to back it up. One of my clients did this recently.

There may also be implications if the gifter goes into bankruptcy. If they go bankrupt creditors will look to see what assets were disposed of and then look into those transactions. If they are not done at market rates they may try to reverse those transactions on the basis of them being done to defeat creditors.

If the person gifting is going to apply for the pension, then the social security office may penalise them for up to 2 years.

If you pay off the property and then want to move and buy a new place to live in you could end up with no deductions on the old one and so pay more tax and, since you have no cash left will have to borrow to pay for the new one and the interest won't be deductible.

What state are you in?

Sounds like that woman has an equitable interest in the property as she contributed to the purchase price. Since this means she has a caveatable interest it may be hard to remove the caveat by going legal on her, and could be very costly in the supreme court. You may need to negotiate with her, or her parents – maybe they may be more reasonable.

Get some old law textbooks – you can get them very cheap from the uni second hand bookshops and learn as much as you can about caveats and equitable interests. At the same time seek the advice of a solicitor.