Forum Replies Created
- an3 wrote:Hi Terry
I am located in Sydney. I would appreciate if you could recommend an accountant in Sydney who specialises in property.
Thanks
An
Try Martin at http://www.houseofwealth.com.au (I am a consultant to HOW)
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
Which bank is it with? Won't be easy, but worth a try.
If only you had structured your loans properly you woudn't be having this problem. Let this be a warning to others out there.
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
I am a solicitor and know a little bit about tax too. Located in Sydney
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
Neither. Will depend on a few things such as how the money is used.
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
$1000 is a lot for one individual with investment property.
Inner west of which country/state/city.
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
Units woud reflect the value of the property owned by the trustee.
Think also about
bankruptcy
death
incapacity
liability
caveats
power of attorney
family law disputes
etc
What would happen if, mid project, the spouse of one unit holder lodged a caveat on title under a family law dispute for example
What if one unit holder ended up in an accident and in a coma unable to sign.
What if 2 refuse to pay the loan.
Who will guarantee the loan? Who will control the trustee?What if 2 gang on on the one?
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 complex.
Need to consider heaps of things such as
1. Land tax
2. stamp duty on exit
3, minimsing guarantees
4. existing structures
5. exit strategies
6. GST
7. Tax
8. Asset protection
etc
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
Can I stress that you shouldn't set these structures up on your own. Seek assistance because I have seen a number of problems arise such as
1. Hybrid set up by online deed. The person borrowed in the wrong name – massive lost tax losses which are unuseable.
2. Settlor was main beneficiary's son!
3. Invalid unit trust because trustee and unit holder was the same
4. Unit trust hit with land tax because it wasn't a fixed unit trust
5. extra guarantees needed because old mother named in trust deed.
etc
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 is a section of the Tax Act which basically allows the commissioner of taxation to deny a deduction if it is a scheme entered into with a dominant purpose of getting a tax deduction. Much more complicated than this of course.
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
Well it depends. You should really have only one property per unit trust for a variety of reasons.
If you buy the property in your own name then it is stuck and you cannot get all the other benefits of a unit 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
Hangon, I have to disagree with myself here.
Having a trust can improve borrowing ability. Imagine if you buy a IP1in your own name.
You later suffer a credit blemish, you have heaps of equity, but cannot access it to pay out a judgment (for example). You must resort to selling or using a non confirming lender.
But if you had a trust with a company as trustee. You just resign as director and replace the position with your spouse and refinance.
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
Trusts don't assist borrowing capacity in my opinion.
A unit trust offers little asset protection, but what it does offer is flexibility.
The different, day to day, in owning in a personal name or owning in a unit trust with a person owning the units will be very similar. Almost same tax treatment, especially of you borrow to buy the units.
But hte flexibility if offers is much wider – the unit trust offers:
– the refinancing principal
– the ability to transfer units at less or no stamp duty, without needing to change the title deeds
– the ability to transfer units to a SMSF (impossible with residential property if owned by a person)
– ability to put in a discretionary trust later on
etc.
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
cs_rlewis wrote:well i dont know who to believe anymore.negatively geared people say its a good idea, positively geared people say its a bad idea.
What is a bad idea? prepaying?
I think you may not understand the concept. It has nothing to do with postive/negative gearing. All you are doing is bringing forward expenses.
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 doesn't make sense for 2 reasons:
1. This would make your property even more negatively geared.
2. Why pay more than double the interest rate to do so?
Fees and interest could be deductible under certain conditions.
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
You cannot rent from yourself just as you cannot marry yourself/borrow money from yourself/pay yourself.
But if you had a trust or a company owning the property then it would be possible.
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
Option 1 may be not so bad depending on the long term plans. If you do take option 1 and cannot pay the loan for whatever reason the bank will sell your house from under you. It is generally better to have the investment as security so that this is their first line of attack if things go bad. But, if you are doing a reno and intend to sell in the short term then maybe 1 is the way to go.
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
I wouldn't bother myself unless you had an unusally high income this year. If you do it now you will have more deductions this year and little next 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
[email protected] wrote:Thank you very much for your response and advice Terry. A further question would you change the setup if it was a residential rather than commercial?Could you repeat the question please? (only joking!)
Generally not, but if the property is in Victoria or if there was a possibility that the property could be lived in at some stage in the future then maybe.
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
I would be very reluctant to buy a commercial property in a personal name. There is a much greater chance of litigation for starters. Also tax inflexibility. I would suggest a unit trust with possibly a discretionary trust owning the units.
I agree with Alistair about getting finance now too. And that is a good idea about borrowing as much as you can now and then once you settle you could borrow funds at a cheaper rate on the residential and then pay down the commercial loan by on lending to 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
Why is this so?
Because with a discretionary trust there is no guarantee that any beneficiary will receive an income from the trust. This is the case even if the beneficiary is the one that controls the trust. Therefore any borrowings to be ‘invested’ into the trust would be done with the possibility of not getting any return and this would not be a commercial transaction.
Using a unit could could enable the borrowings to be deductible. If the borrower borrows to buy units in the trust and they have fixed entitlements to the income and capital of the trust then the interest would generally be deductible. They are borrowing to buy income producing units.
If the trust is a fixed unit trust then it may be possible to access the land tax free thresholds too.
Furthermore using a trust may enable the units to be transferred to a SMSF down the track too – possibly without stamp duty. Imagine having your property owned by a SMSF where in retirement there is no income tax and no CGT.
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