Usually it is accountants that set up trusts. You will need advice on the tax aspects. But you will also need advice on the borrowing aspects too, so I recommend you speak to your broker too before you establish it.

Hi Pete

A bear trust is where A owns for B. B is the true owner, A just the legal owner. So I don't think you would pass the FIRB rules on this.

Hi Darren

You left out stamp duty which you would also incur (I think) when you sub-divide the land into 3 different names.

If you build and sell GST would be payable on the building part too as the building is new. If you sub-divided the land and then built, then no GST as you will be living in it. If you were to sell down the track, then none as the property would no longer be new.

I just looked up http://www.firb.gov.au and this is what it says on companies and trusts:

Under the Act, a foreign person is:

• a natural person not ordinarily resident in Australia;
• a corporation in which a natural person not ordinarily resident in Australia or a foreign corporation holds a controlling interest (that is, a holding of 15 percent or more);
• a corporation in which 2 or more persons, each of whom is either a natural person not ordinarily resident in Australia or a foreign corporation, hold an aggregate controlling interest (that is, a total holding of 40 percent or more);
• the trustee of a trust estate in which a natural person not ordinarily resident in Australia or a foreign corporation holds a substantial interest; or
• the trustee of a trust estate in which 2 or more persons, each of whom is either a natural person not ordinarily resident in Australia or a foreign corporation, hold an aggregate substantial interest.

A substantial foreign interest (ie, a controlling interest) occurs when a single foreigner (and any associates) has 15 per cent or more of the ownership or several foreigners (and any associates) have 40 per cent or more in aggregate of the ownership of any corporation, business or trust.

The Government seeks to ensure that foreign investment in residential real estate increases the housing stock. The Government, therefore, seeks to channel foreign investment into activity that directly increases the supply of new housing (that is, new developments – house and land packages, home units, townhouses, etc) and brings benefits to the local building industry and their suppliers.

The policy on developed residential real estate is negative. The effect is twofold. First, it helps reduce the possibility of excess demand building up in the existing housing market and secondly, it aims to encourage the supply of new dwellings, many of which would become available to Australian residents, either for purchase or rent, therefore maintaining greater stability of house prices and the affordability of housing for Australians.

here is some of it

Temporary residents’ exemption

Temporary residents will not be required to notify proposed acquisitions of:

• an established dwelling for their own residence (not for investment purposes);
• any new dwellings; and
• single blocks of vacant residential land (other acquisitions of vacant land will require notification and will normally be approved subject to development within 24 months).

The exemption will include acquisitions of property by temporary residents via their wholly owned trust or Australian incorporated company.

The existing notification requirements will continue to apply to non-residents, who must notify all proposed acquisitions of residential real estate.

If you have one pre-approval you will probably qualify for other banks too. Why not wait till you find something? Save time and your credit file.

Although it won't look bad. It will not be looked on as bad credit. Just don't over do it. (I once seen someone's file who had about 10 pre-approvals!!)

no point!

Can't help you any further.

Depending on how much you are borrowing you can claim second job income. Casual – usually have to be there a while.

Extremely risky.

You essentially will have no recourse when things go wrong. One of my friends has just lost $120,000 by going into one of these schemes.

You will probably find that the figures provided are biased. Property values are not as high as they say. You will have no security. They may offer a caveat over the property, but this is useless. If they offer 2nd mortgage you may find if they go down then there will be nothing left after the first mortgage takes their share.

They may also offer a personal guarantee like my friend got. But you may find that they do not actually own any property personally or an any assets. If they do have assets, then these will probably be highly geared already – otherwise they wouldn't need your money.

D

You had better consult an accountant as I am not sure.
My understanding is when you sub-divide land you are creating new land. The would probably be GST charged on this if you were to sell it. But I recently purchased some new land, just sub-divided and there was no GST charged. I am not sure why???

I also think if you are transferring the land into different names (from 3 names on the original or 1 name each on the new), then this would be considered a sale. And GST and CGT would apply. I think Richard is saying it won't apply if all 3 names on each title after the split.

Remember that CGT is charged on the vendor when selling an investment property. It doesn't matter if the purchaser intends to live in the place. GST is not normally charged on residential property, but it is (I think) on new property. It is the purchaser who would pay this.

CGT would be payable at the end of the financial year in which you sell. So if you sell now it would be due in your tax return which you must submit by Oct 2009. Gives you some time to work around it and try to reduce it – eg prepaying interest to get your deductions up, delaying other income etc.

It is all ridiculously complicated. I don't even try to keep up with it all now as it is too much effort.

Remember I am not an accountant. (Any accountants out there, Eddie??)