Hi Guys,
As the title suggests, I'm sitting on a massive pot of gold, and I really don't know where to go from here.
I own two properties,
Tahmoor: 320,000
Buxton: 300,000 (PPOR)
Mortgage: 290,000 @ 5.44% ~ 8 years to go. Paying 600p.w + 300 from rent = 900p.w
Equity: 330,000
Income:
Me; ~ 50,000 (Casual at Armaguard)
Wife: 76,000 (Teacher)
Rent: 17,000
Defaults:
Me: Two credit cards. One for 12000 Just paid in full and one for $1800 will be paid in full by eofy.
Wife: None
No other debt. We own both cars.
Now here comes the clencher. My dad has 9 acres at Tahmoor that will be approved for subdivision into 6 x 1 acre lots and he will retain 3 acres to live on. He wants to sell the land with DA attatched for ~ 1 million and give each of his 4 kids 250k each. But apparantly he will be stung with gift tax.He was thinking of buyiing our homes of us and writing in his will that we inherit them back when he dies. I don't like the idea of this. How can I borrow against a house I don't own?. Will rental income be his income, or mine?
I've also read McKnights book, and want to go down the Trust road, so I can borrow and borrow and borrow.
So the $64000 question is "how do I structure my finances to maximise borrowing, and how should I take my living inheritance from my dad?" Pay it into a Trust?
Peter
Also, the ultimate goal would be to live in a house at Wilton for ~700k within 4 years. My daughter will be starting school then. So I hope to have, Tahmoor, Buxton, Wilton and as many + cash flow properties as possible in a Trust.
It's killing me to think I'm going to miss the boat. So many opportunities to buy Cash flow+ properties, with a 250k leg up, and I don't know where to go from here?
Oh, and a third thing. Tahmoor needs a new bathroom and kitchen urgently. 20k on a make over would increase value to ~380k
You've been told wrong. Australia does not impose estate, inheritance or gift taxes.
http://comparativetaxation.treasury.gov.au/content/report/html/11_Chapter_9-07.asp
If your dad sells the lots, there is of course Capital Gains Tax that will be payable on his gain. Then whatever is leftover is eligible for gifting.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
JacM wrote:If your dad sells the lots, there is of course Capital Gains Tax that will be payable on his gain. Then whatever is leftover is eligible for gifting.He definitely needs expert advice on how to structure this for the least taxes payable all round, CGT, Stamp duty etc. TerryW ???
He could buy the land and his old man gift the money back if that reduces stamp duty and CGT on the minimum allowable price for such a transaction as opposed to the ATO/state taking a higher market valuation for tax purposes in a straightforward gifting of the land.
We have to pay CGT on a PPOR sale?
Hi Captain
Yes i hate to say as the property is over 5 acres so yes your father would pay CGT if he gifted the property to his children.
You are unable to borrow against a property which is not in your name so using the potential equity is out of the question.
Ignore the concept of ever ending borrowing by using Trust structures as it simply does not work Steve has subsequently corrected this statement.
Without considering your potential future inheritance you would seem to have sufficient combination of equity / income to set yourself up nicely if you structure your finances correctly going forward.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Captain Capital wrote:Hi Guys,As the title suggests, I'm sitting on a massive pot of gold, and I really don't know where to go from here.
I own two properties,
Tahmoor: 320,000
Buxton: 300,000 (PPOR)
Mortgage: 290,000 @ 5.44% ~ 8 years to go. Paying 600p.w + 300 from rent = 900p.w
Equity: 330,000
Income:
Me; ~ 50,000 (Casual at Armaguard)
Wife: 76,000 (Teacher)
Rent: 17,000
Defaults:
Me: Two credit cards. One for 12000 Just paid in full and one for $1800 will be paid in full by eofy.
Wife: None
No other debt. We own both cars.
Now here comes the clencher. My dad has 9 acres at Tahmoor that will be approved for subdivision into 6 x 1 acre lots and he will retain 3 acres to live on. He wants to sell the land with DA attatched for ~ 1 million and give each of his 4 kids 250k each. But apparantly he will be stung with gift tax.He was thinking of buyiing our homes of us and writing in his will that we inherit them back when he dies. I don't like the idea of this. How can I borrow against a house I don't own?. Will rental income be his income, or mine?
I've also read McKnights book, and want to go down the Trust road, so I can borrow and borrow and borrow.
So the $64000 question is "how do I structure my finances to maximise borrowing, and how should I take my living inheritance from my dad?" Pay it into a Trust?
Peter
You and your dad should seek legal advice here as there are thousands of dollars in potential savings.
If you dad were to structure things right he may be able to get a significant tax saving by selling the property now to a trust which then does the development. Perhaps 4 trusts as tenants in common or maybe even 4 trusts and himself as tenants in common. One trust for each child who takes control now or at completion.
Another option is for him to pay more tax now and leave each child a share in a discretionary testamentary trust at death – greater asset protection and tax savings for each of you after he dies.
Another option is to get him to do it, sell, wear the tax and then gift the money to each child or into their respective discretionary trusts.
Many many legal issues to consider.
That book is not correct on trusts and borrowing.
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
Ps, just noticed Tahmoor – I sold 5 acres there a few years ago and made a killing. 5x what I paid for it!
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
"How can I borrow against a house I don't own?. Will rental income be his income, or mine? "
If he bought your house you would have cash available (which could be seen as better then re borrowing against equity) .. but you would lose your rental income, but also lose the leftover debt on the property as well ( a positive).
wilko1 wrote:"How can I borrow against a house I don't own?. Will rental income be his income, or mine? "If he bought your house you would have cash available (which could be seen as better then re borrowing against equity) .. but you would lose your rental income, but also lose the leftover debt on the property as well ( a positive).
An over complication with high transaction costs. The objective is to move assets from the parent to the children as efficiently as possible.
Freckle wrote:He definitely needs expert advice on how to structure this for the least taxes payable all round, CGT, Stamp duty etc.There is an excellent estate planning lawyer in Bowral, not far from Tahmoor. http://www.bertolloadvisory.com/about-us. As well as being an estate planning specialist, Denis Bertollo has financial planning qualifications, these will help when planning your property investment strategy. We are situated directly across the hall upstairs in Springett's Arcade, feel free to drop in for a coffee.
Modernity Investing
Email Me
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