I’m an Aussie living overseas. I am looking to buy an apartment in Melbourne for my kids to use when they go to Uni, my oldest still has ~2 years before she’ll start. In the meantime, I planned to rent out the apartment. In the longer term (10 years down the rode), I planned to live in the unit when I retire.
I should mention I have lived my entire adult life outside of Australia (this will be my 1st home in Australia), I really don’t know much about the legal and tax issues for purchasing / owning property.
Based on this situation, does anyone have suggestions on how best to structure the purchase?
Hi @robmc
The thing you’ll definitely need is a good mortgage broker who knows how to approach financing deals like this (presuming you require borrowings).
Last I checked, expats pay 30% in every dollar of profits in tax.
You’d also need to consider how you will select an appropriate property and be confident of the condition of the property if you’re not here to see it. ie will you pluck something off the internet and hope it’s ok or organise a Buyers Agent to assist. Many of my clients are expats that need a person in the know on the ground to organise everything for them.
Buyers Agents normally have a network of mortgage brokers that they work with.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
Get some legal and tax advise as well. No main residence exemption and no 50% CGT discount. How are you going to fund it? Perhaps you could lend money to your daughter who could buy 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
Thanks for the feedback. I was planning to pay cash, so no financing involved. I’m familiar with the Melbourne area (I usually come back once a year) and still have good friends in the area. So far I’ve had friends look at potential apartments and provide their opinion and feedback. I already have a pretty good idea of what and where I want to buy.
As far as tax… I was expecting after depreciation and other normal expenses the profit would be minimal. I will need understand more about the rules for depreciation as well. Your suggestion of tax/legal advise is probably a good idea.
Terry, the idea of lending money to my daughter to buy it… what is the advantage? BTW, my oldest daughter is currently 16… is she allowed to enter into a legal contract?
Thanks,
Robhi Rob
Your daughter could get the main residence CGT exemption and/or th e 50% CGT reduction which you cannot, assuming she is a tax resident which she probably would be if studying here. You lend the money so you can take a mortgage over hte property and retain some control in case she wants to sell the property or goes through a divorce. If you die your money lend can be left by your will.
Yes children can enter contracts under certain circumstances.
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
@terryw but that only matters if he is planning on selling.
@rob, just buy it in your own name, yes you don’t get 50% cgt BUT you will get a pro-rata based on how long you live in it yourself eg if you buy and then move there in 10 years AND live another 20 then you will get 2/3rd of the 50% CGT
(lol that’s IF and its a big IF the 50% CGT is in place in 30 years from now).If you aren’t buying a new apartment….then maybe your next 2 years rentals could be wiped out by ‘repairs’….would be a real shame if this took care of the tax issue for rents over the next 2 years :)
It is always best to plan ahead as circumstances change. Owners die and heirs sell too
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
Very true, very true…..daughter could die as well though :P
Very true, very true…..daughter could die as well though :P
Yes, this would seriously need to be considered. But if the dad has a mortgage he would get the loaned amount back. Any capital growth could end up in the hands of someone else, but the daughter’s will could mean it comes back to the dad too.
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
This post has taken a very dark turn… I don’t think I’m going to show it to my daughter! ha ha.
I’m still trying to get my head wrapped around these CGT rules. When planning things many years in advance (kids school choices, retirement destinations, etc…), there is always the possibility of situations changing.
Terry, I will contact seperately. Thanks!
Rob
If you were to purchase, I’d still suggest it might be worth considering finance on the property. You can still park the leftover funds in the offset for the loan – this just at least leaves the flexibility to take those funds out for other purposes should you need, whilst maximising the deductible potential + nil interest unless used.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
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