Hi all,
I have been reading posts and gaining knowledge, but still have questions as everyone's situation is unique. This is my third post in two days!
My situation:
Our only property is our PPoR which is now too small for our family of 6. The property is my name only and we are (after great fourm advice) going to convert to IO, with offset to purchase our 1st IP with LOC, or new PPoR and convert PPoR to IP.I also spoke with our accountant yesterday (unfortunately he does not seem all that savvy with Trusts). He has concerns at the moment regarding PSI and alienation of income, as my husband has been the only income earner this fin year. I had this concern before we set up the Trust in Dec 09 to reduce my husbands taxable income, but my accountant advised me it would not be a problem, as discretionary trusts can distribute money however they like. He suggested we acquire property to make the Trust start looking more "legitimate" for taxation purposes, after telling him we are looking at starting investing in property.
My questions are:
1. Should we buy a new PPoR and convert our current to an IP, or keep PPoR and buy an IP that is larger than our current home, that we could move into at a later stage if need be?
These are the property figures:
PPoR value = $345,000
Owing = $200,000IP we are interested in cost = $555,000
2. Should I transfer our current PPoR into the Trust?
Terryw, if your reading this, this post is an extension of my previous post on renting a Family trust IP.
I hope I am making sense and would appreciate forum member thoughts.
Thanks
Pootiei'll leave this for the pros however if you dont already know to move the property into a trust you'll be up for stamp duty, plus any legal/loan fees.. which may put you off the idea altogether.
If you dont want to go the Trust route you could look at your husband merely buying out your share and borrowing accordingly.
In some States there is no Stamp Duty charged where the transfer is between related parties under the "love & affection" clause.
Richard Taylor | Australia's leading private lender
i AM IN?jAPAN ATM AND HAVING?PRobs with keyboard!
First should ask?What is the purpose you are trying?To achieve?by?trAnsfering to a trust?
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
Hi,
Thanks for responses.
Terry, our accountant has concerns about the ATO not being happy with PSI, as my husband is the only income earner at the moment and may be for a few years at this stage. He wanted the Trust to earn money form another source or aquire an IP to appear not to be avoiding tax or a scheme?
We are currently looking at finance to purchase an IP (with a view to becoming tenants as posted earlier) and I thought maybe we should also transfer our current PPoR into the Trusts name. My accountant has me really worried and the thought of being audited sounds scary to me.Pootie
That sounds a bit drastic – to transfer a house and incur stamp duty just because of fears of PSI. I think there are probably other ways around it and transferrign the house probably wont resolve the problems anyway. Maybe get a second and third opinion.
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,
With the knowledge and great guidance from this forum I have thought things though and will most likely do the following:
1. Buy an IP through our Family Trust with LOC and rent it as tenants (ensuring we meet ATO guidelines and may also apply for a private ruling as suggested if needed.
2. Change my curent PPoR loan to int only, with offset and rent it out it within 6 years to avoid CGT.
3. Use proceeds to purchase 1 or 2 more properties.I hope I am on the right track to accumulating wealth through IP's.
Big thanks
Pootie
Sounds good, but why a LOC for the IP? you can get into trouble using these
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
Agree with Terry would go the good old fashioned Interest only loan over a LOC anyday.
Richard Taylor | Australia's leading private lender
Thanks Terry and Richard,
Just to clarify, I should just organise finance (loan at int only) for the IP based on equity in PPoR and not take out a LOC on my PPoR.
Pootie
I would take out a LOC on the existing house and just use that as the 20% deposit. Use an IO loan?for the remainder with a 100% offset attached.
Whatever you do don:t go and get wages etc placed into the LOC as this will make problems later.
When the new property has increased in value you can get it revalued and repay the deposit used from the LOC.
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
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