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When a person acting as trustee borrows they are the borrower, personally liable and indemnified out of the trust assets. If things go wrong their personal assets are at risk.
When a company is acting as trustee it will be the borrower, the company personally liable for the debt and indemnified out of the trust assets. If things go wrong the company’s personal assets will be take risk – that is why company trustees generally don’t have any assets.
The shareholders cannot be liable for the company debt and even the director is not personally liable – but there can be ways they are tied in to become liable.
All this changes though when guarantees are given. Under a guarantee the guarantor is contracting to make themselves personally liable to pay the debts of the company – both personally and in its capacity as trustee, but only if the company does not, or cannot pay them. This is a contingent liability.
This means that when a company borrows, whether in its own right or as trustee, the debt is not a debt of the person.
If they go and borrow separately this is not their debt. If they set up a second company the debt of the first company is not debt of the second company – no connection, other than via the personal guarantee.
This is the issue though:
Some lenders, most lenders, tread guarantees the same as borrowings for serviceability.
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
That is probably just loose wording. People talk about trusts borrowing all the time, but when you dig down it is the trustee borrowing in their capacity as trustee.
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 does the book say?
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
Keep in mind it will be difficult to qualify for a loan with that income.
What are you trying to achieve?
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
CGT = proceeds less cost base
cost base would be apportioned between the 2 on a reasonable basis. Might be based on land area or valuation generally.
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
seek credit advice. There are over 350 ways to increase borrowing capacity – but not all will be relevant to you, but a large number would. These include things such as reduce other debt, reduce living expenses, convert bonuses into salary, extend loan terms back to 30 years, get lower rates, use different lenders, low doc loans (without lying), guarantees, ownership structure, borrowing structure, related party loans, etc etc.
Trusts themselves won’t increase borrowing capacity, but companies can, whether as trustee or in their own right. this is because the company is the borrower and not the individual.
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
A member of a superfund could potentially buy off the trustee – but seek legal advice as many issues.
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 would never consider buying a company title property myself, some do it for lifestyle reasons
in Sydney many old properties in the city or kings cross area are company title, but I don’t think a good investment generally
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
not if you are a beneficiary of that SMSF
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
Its hard to say.
Do you think the value will increase?
are you able to borrow?
Is it holding you back in some way?
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
Its a mistake to think a ‘trust’ equates to asset protection.
It comes down to several things such as
a) terms of the trust deed
b) structure of the trustee
c) funding the trust
d) documenting things
e) transactions
As an example I have seen many people that might set up a trust, usually with an accountant, who have never read the deed. They paid the deposit on the property and then make the loan repayment on the trust’s loan.
If they went bankrupt it is easy to argue the trust does not exist, or the trustee holds the property on a resulting trust for them. So no asset protection at all.
To check, if the solicitor is holds a NSW practicing certificate you can search here https://www.lawsociety.com.au/for-the-public/find-a-lawyer
Search for the solicitor or the firm name.
There are similar ones for other states.
Lawyers must renew every year.
Sometimes non-legal firms provide documents which have been drafted by a lawyer. Unless that firm itself holds professional indemnity insurance you would not be covered if things went wrong. You could not sue the lawyer either because you would only have a contract with the intermediary firm.
My company is an incorporated legal practice and covered for legal advice. I specialise in estate planning, asset protection and structuring.
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
Yes I agree. But I suggest you get the deed reviewed by an independent lawyer before finalizing. Also make sure you are contracting with an incorporated legal practice so you are covered by the lawyers professional indemnity insurance. If you are supplied by a company that isn’t a law firm you won’t be covered.
I have reviewed a few of these trusts, and associated ‘asset protection’ strategies.
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 website is terrible and they are getting all updated at the moment.
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 advice is for you to seek specific legal advice when setting up a trust – from a solicitor with a practicing certificate.
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
1. comprehensive legal advice is needed.
2. you or the entity would probably want to borrow it if possible. no relevant information given. have you a paid off main residence? Excess cash you can use etc.
3. heaps – death, family law, incapacity, bankruptcy, land tax, stamp duty, CGT/Revenue, serviceability, income tax, asset protection, estate planning, trust law, corporations act etc etc.
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
Westpac do it also
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
Changing to IO will result in a reassessment.
Have you spoken to the lender to see if they will allow the substitution of security to a term deposit?
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
take the profits and apply for a new loan is the best way.
If you need to keep the loan open see if the lender will allow it firstly. Your only choice would be a term deposit at the prevailing interest rate. The only way to mitigate this is to keep the period between sale settlement and purchase settlement to a minimum.
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
Not available as far as I know
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
That option is available, but the interest could not be deductible because it relates to a use which is non-income producing.
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