Hi All,
This is my first post for a long while but would invite any light shedding and brain storming from the many enlightened on this wonderful forum! So here it is.
1:Have PPOR with sea views in popular coastal town and looking to turn into IP and rent as holiday accom. Due dilligence suggests that rent return could be around $30-40k pa. In joint names
IO loan $350k valued at $815k
2: IP since 2009 currently rented @ $255w to good long term tennants.IO loan @ $260k recent reno values @ $280k. Future devt potential. In family trust
3: Block of land one street back from beach. IO loan @$215k. Plan to build on this as PPOR. In family trust.
So first prob is all these loans are crossed with one of the big four..we are wiser now thanks to this forum!!!
We are involved in the construction business so we believe we can build for around $250k.
But we want to try and maximise our deductable debt and pay off or minimise our PPOR debt.
I have read on the forums that there is a possibility of buying out a share of the PPOR to turn into IP, making it tax deductable and wiping out our PPOR debt.
We are keen to keep all the properties as they all have great potential for future growth in this area but feel like we are stuck at present and need a direction to move forward.
Ella
Hi Ella,
What is the question?
A spouse can buy out the other spouse's share, and if the property is in VIC it can be done on an investment property without stamp duty. CGT will apply.
It may be worth it to knock out the non deductible debt and to rearrange everything. ie a restructuring exercise
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
Thanks Terry,
We are in SA so Im not sure of the stamp duty implications of say my husband buying me out or vise versa. Our income is distributed via a Family trust, so would it make any difference as to who bought out who?
Being a PPOR will there be any CGT if it is then turned into an IP say in 10 months time once new residence is built?
Does the PPOR have to be sold at market value?
We would really love to knock of the new mortgage with the funds from the transfer/sale, that is the goal, but I am concerned about the Xcoll of the 3 loans and how difficult is it to get out of this structure.?
Has anyone else applied this structure or been in the same situation?
Ella
Hi Ella
As Terry has mentioned a Spousal Transfer could certainly be worth considering especially at the level of value you are talking about. I assume the current PPOR is your individual names?
Not sure which one of the Big 4 your loans are with however need to probably be careful when untangling to make sure you don't end up in the same mess.
Funnily enough one of the 3 reasons I would ever cross collateralise a loan for a client would be in a Spousal transfer situation to maximise the deductible borrowing however unlikely your Bank or Banker will have any idea at all.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Richard,
Yes the PPOR is in both our names.
ANZ is who we have been with for the last 6 years or so, and they have been ok to deal with but yes the loan manager does not have much idea about how to structure from an investment point of view, and obviously only serve their interests.
Is it difficult to get out of this structure and how would I go about it?
We really need to set up a structure that is going to suit long term and reduce PPOR debt and maximise deductibility.
By the way Richard..what are the other 2 reasons for not XColl?
Cheers
No you are correct Anz would have absolutely no idea on the why's and wherefore's of uncrossing your loans and probably can't understand why you would want to do it in the first place.
They adopt the attitude if it is less security for the Bank why would you want do it and certainly if you do we would not want to encourage it.
You need to go back to square 1 and start untangling 1 at a time something we seem to spend out life doing for forum clients who have their loans so poorly structured by their Bank or Bankers. As i say to many of my clients it is never a problem until you want to do something and then of course it becomes an issue.
The other 2 reasons for crossing would be:
1) If the valuation had dropped and you still wanted to access equity the existing lender may run off their existing figure where the last valuation was < 12 months ago.
2) Where you want to go > 90% lvr and the lender and the mortgage insurer agreed if they felt they had extra security.
Can't remember the last deal i did where we crossed a clients loan but if it is right for the client then would recommend it.
Hate to say wouldn't be the case here with multiple securities.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Your absolutely right about it not being a problem until you want to move forward……
We have been tossing up so many scenarios to try and get ahead but we feel that keeping all 3 properties would be ideal as they are in great locations and have very good prospects for future growth. Now we need to just make it work for the long haul.
We have a family trust set up as we work in the construction industry both for asset protection and income splitting.
Would the transfer be liable for CGT, or exempt because it is PPOR even though we would be converting to IP ASAP?
Im not sure of the stamp duty implications as we live in SA..will have to do some more digging?
You mentioned that you deal with this everyday Richard, as a broker is this something that you could look at?
Thanks so much for your input
Cheers
Sure Ella feel free to shoot me an email with the numbers break up to start with and we can explore the options.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Ella, don't try to untangle the web yourself, get Richard to help you. He's a gem
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Thanks everyone for your input . I feel that this could be a step in the right direction. I think I found some info through sa revenue which states that if it is thr transfer between spouses of the matrimonial home then it is stamp duty exempt. Does anyone have any exp or input in this in SA.?
thanks
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