Hello everyone,
Bit of background to begin with. I found this website after reading Steve's book and I've read heaps of the threads in this forum and you guys are so helpful.. so please help me! I'm almost 21, live in QLD with my parents, 2 sisters and 2 brothers. My parents have rented all their lives. I earn a fairly good rate as a pipeline drafter, and save $2000 (if not more some weeks) a fortnight. I'm hoping to have at least a 20% deposit for a property. I found this website after reading Steve's book and I've read heaps of the threads in this forum and you guys are so helpful.. so please help me!
So two things, I'm thinking of buying a house that my family and myself can live in, they currently pay $450 a week rent and they'd like to keep it at that. I believe I can afford to pay the rest of the repayments and more myself quite easily.
I'd like to buy the house through my younger brothers name and then I will become the guarantor. He's just turned 18, has downs syndrome so he requires a carer (which is my mum currently). I'd like to do this so that we can get the FHOG for this property, but also once the mortgage becomes less and the property becomes positively geared, i'd like to be able to branch off and buy another place for myself (as I don't plan on living with my parents forever).
Is this even a viable plan or am I going down the wrong track?
You need specialist advice.
There have been some recent amendments to the laws relating to special disability trusts. If your brother qualifies you could set up a trust for him and the house could still receive the main residence CGT exemption and not count towards his centrelink assets test. I am not sure if any lender would lend for this though, it is worth finding out. Also not sure about the other family members living in the trust house and thereby benefitting – they may need to pay rent to the trust for their share of the house. But this rent could be tax free to your brother. Up to a certain threshold he would not pay tax and it would not reduce any centrelink benefits.
Another option is to purchase in your name and then rent the property to your parents. You could live in the house briefly and then move out and thereby qualify for the main residence CGT exemption. You may also be able to claim any losses against your income – which sounds high. So this may work out well.
You need to do some careful planning.
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 Victoria
Welcome to the forum and i hope you enjoy your time with us.
Terry has made some excellent points in regards to the set up considerations.
In relation to the finacing perspective i dont believe you would find any lender agree to such a proposition on the basis you have outlined. Most lenders would want you to be a co-borrow rather than a Guarantor.
Course further hard data would be required to provide a more structured response.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thank you both for taking the time to respond!
The second of Terry's options will probably be the way to go after researching Special Disability Trusts. It will be at least two years before I have the funds necessary to begin property investment but I am doing everything possible to gain useful knowledge that will help me in my future endeavours.
Thank you again Terryw and Qlds007
Richard, Do you think Victoria could borrow as a trustee for a SDT with her brother as beneficiary?
As i type I am thinking and they may have a problem with no rental income, and other restrictions associated with the 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
Victoria – make sure what you read about SDTs was currently. I think the legislation only changed this year.
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
Victoria, my advice to you as a new investor/purchaser is to keep it simple. Once you start getting trusts, co-borrowers, guarantors et al involved you will overcomplicate things that don’t need to be complicated.
My thinking is:
Corporate trustee structure where Victoria and Brother are directors and beneficiaries.
Both will guarantee the trustee company who will be the borrower of the loan, servicing will be with disability pension and Victoria’s income and rental income if this property is considered a investment.
I do not believe that the First Home Grant will be approved for Trust purchase in any state.Looks like you are trying to purchase under your brothers name so you can save your own grant. Unfortunately you cannot bake your cake and eat it as well. You are required to be a borrower to obtain the loan and this means being on title as well.
Don't think that is a good idea Hank – or even possible. Victoria's brother has a disability and is in need of a carer. If he has an intellectual disability then it wouldn't be possible for him to act as a director.
A special disability trust would be much more advantageous because of the ability for the house to be owned by the trustee of the trust and be CGT free. This is not available with discretionary trusts. There are also land tax exemptions which may be available. The trust is even able to retain income and have it taxed at the beneficiariary's income tax rate – whereas it would be taxed at 46.5% with a discretionary trust.
Victoria even if you don't use the SDT to purchase property now you should nevertheless look to set one up for your brother so he can take advantage of tax and other benefits.
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 Victoria
Terryw and Qlds007 are very knowledgeable chaps. If you do a search of all other posts they've made on the forum you'll be overwhelmed with a wealth of knowledge. Listen to these two carefully. They know their stuff.
Best of luck!
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
I agree with Terry i cannot see how Victoria brother could ever be a Director in his current state of health.
No lender would ever consider such a loan.
Yes i do think a SDT is possible Terry but not convinced that would necessarily be the way to go.
If Victoria buys in her own name and being her first purchase she will get both the FHOG and S/D concessions in Qld.
She intends to initially reside in the property so all good there.
She doesnt have to use the FHOG as debt reduction so might be better off going interest only from day 1 and keep the FHOG plus additional repayments in her offset account.
I dont see the issue of having to rent the property at market rent down the track being a real issue.
Victoria's brother may even receive rental assistance which would certainly help all round.Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Yes, i agree Richard. In fact I said almost exactly the same thing in a PM exchange with V.
The DST is still worth considering, but maybe down the track.
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
Yes agreed Terry.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Appreciate the responses i have today learned about SDT’s, good place to educate myself better.
not sure if this will help —- i was told that my son could only borrow up to $70,000 for a home loan and he would qualify for the FHOG he would then become part owner of the property – told any other way can become a legal nightmare
mcgrandles wrote:not sure if this will help —- i was told that my son could only borrow up to $70,000 for a home loan and he would qualify for the FHOG he would then become part owner of the property – told any other way can become a legal nightmareWould you mind rephrasing this????
Are you saying someone recommended your son buy a property with others? If so he would only qualify for the FHOG if all the other purchasers also qualified and they would only get one FHOG between them
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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