I was just reading another thread and got to thinking that it might suit me to sell into a trust – BUT my knowledge is very limited.
I have a vacant triplex block in WA, i intend to develop it – probably when the market picks up again (could be a while) my question is: Shoud i sell into a trust or not? I want to leave work in the next 12-18 months to chase my property dream full time and want to use this block as security. My partner and i have a few other IPs together however he is very risk adverse and honestly it has been a struggle to get him to invest in anything, i would like to separate the tx block as it belongs to me and finance my investments independantly – to save us both the stress! Should i sell it into a trust and can i use it to self certify a LOC (I have an ABN older than 2 years)? Will i need to pay CGT – net capital gain will be at least $400K prob more – i will be able to clear the loan on the block before selling into a trust. Because the property is not income producing i'm not claiming any tax benifits at the moment. What will be the benifits of selling into a trust? Thanks in advance for any comments.TerrywParticipant@terrywJoin Date: 2001Post Count: 16,213
Costs associated with selling would include CGT, legals, loan application fees (and exit fees?). Add all these up and see what you think when comparing these with the benefits to be received in the years to come. Trusts may also have to pay more land tax than individuals.
The benefits could include less CGT in the future on selling, less income tax on any income such as rent, and asset protection.Another benefit is that you may be able to release equity and make this tax deductible – the trust can borrow to buy the land, paying you and helping you pay down non-deductible debt.
Another thing to watch out for is the fact that trusts cannot distribute losses.
Thanks Terry .. lots to research there! I don't suppose you are in WA?TerrywParticipant@terrywJoin Date: 2001Post Count: 16,213
Yes lots to research and very tricky too, just when you think you have covered everything, something else will pop up.
I am based in Sydney (but am in Thailand atm).Richard TaylorParticipant@qlds007Join Date: 2003Post Count: 12,024
I do around 1 a week of these type of loan for clients at the moment working closely with a large firm of Accountants.
Terry as always i bang on in relation to the possible Stamp Duty and CGT costs however CGT will only be applicable on the actual capital gain. If i read you post correctly the market is relatively flat and the capital gain will only come from doing the development.
If this is the case you may find that the current valuation is the same as the price you paid for the block and there will be no CGT liability. Also if you have any existing non tax deductible loan such as a personal mortgage you maybe able to pay down this from the proceeds of the sale.
The process is quiet complex but it is certainly worth crunching the numbers.
Thanks Qlds007 … I actually bought the block a few years ago and have already made a min $400k gain – so maybe it wouldn't be worth it for this one???? … Can you recommend any books on the subject?
CheersRichard TaylorParticipant@qlds007Join Date: 2003Post Count: 12,024
Fair enough Anrobel probably not worth it on this one.
I dont think you will find much written on the subject as it is something your mortgage broker / financial adviser will advise on.
Not the sort of thing that is written down in book form.