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Even though you are not paying the interest it would still be charged to your loan and would normally be deductible.
But whether what you are doing is ok or not is another matter. The ATO has issued a ruling saying that they can deny a deduction on capitalised interest if the purpose is to pay off the non deductible home loan sooner.
What is your reason for doing this?
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
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ryan mclean wrote:I have heard of people working overseas for cash…Seriously? only joking. I was pointing out a mistake in your English "been claiming your income".
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
Declaring your income?
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
income tax, not CGT probably.
It could be possible to transfer the remaining one to a SMSF if the structure is set up first and there is no debt on the property. CGT or income tax would be payable though. But you may get around stamp duty.
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
excellent Freckle.
And if the court case is lost your costs will be capped at around $700.
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
chris_bc wrote:Thanks for your comments Terryw. I think the concepts are starting to set in my head, but I'm still a bit puzzled about whether I'm likely to be better off purchasing in my name or under a trust.I'm currently looking at a short list of properties with cash flow (after accounting for rental management, repairs, rates, etc) of between a few hundred and 2.5k. Because this is pretty small I'm guessing that depreciation and other deductions will shrink this to negative – in which case I'd assume it's better to be personal ownership rather than trust? Or am I barking up the wrong tree?
What do you mean by "better"?
Taxation is only on issue and you need to consider short term as well as long term. What will things be like as rents rise?
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
Sue em
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
If you use your home to produce income then it will be subject to CGT. Probably a % based on use.
The 6 year rule only applies to absences.
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
MyRoom wrote:Thank you Terry.Which Australian Bank would you suggest I try first or do you think it's better to go here in China first?
Regards,
Michael
Nihao Michael
Don't think a Chinese bank would lend for Australian property, but you may be able to check out an aussie bank in China such as NAB etc.
Or speak to a broker.
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
Aussie bank will lend.
IO possible
You will need to come up with a deposit or borrow in china against the chinese properties.
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
Jpcashflow wrote:Hi terry two my properties are securing the BussinessI don't think this would be correct. You have a loan which may have been used to purchase the business. Probably as Richard said you have real property securing this loan.
I was just thinking, from what was written above, if you had a business which was securing the loan then you would be breaching the loan agreement in selling part of the business. Probably not the case though.
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
They are not accounting structures but legal structures really. A trust is not a separate entity but a legal arrangement where a trustee owns property on behalf of beneficiaries. For tax purposes trusts are treated as separate entities so a trustee buying a property is ignored and the trust is assessed on the property. Therefore from a tax angle it doesn't matter whether the trustee is a person or a company as the tax consequences are the same. ie any losses would still be attributed to the trust.
BTW, there is no way you would want to use a company to own property.
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
Is the 'business' securing a loan?
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
In that case a third party wouldn't probaby be a beneficiary of your trust so you would have to transfer part of your business to them. In NSW this would involve stamp duty. You would also be up for CGT if there was a profit. Then you have to factor in what do they get for their money, how do you compensate yourselfs for working extra if they won't be working in the business. An investor will probably want to pay so much as they would recouperate their injection within 1 to 2 years.
Watch out for disputes. make sure you have a written agreement on how to resolve these. He may accuse you of playing down figures etc.
What if he wants out, divorces, or goes bankrupt too? or dies!
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
Best to avoid partners if possible.
What structure holds the business?
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
If your going to sell then maybe a discretionary trust would be good. Could use the same trustee as the unit trust or personal trustee.
This way any profit could be flexibly distributed – including to the unit trust if need be – to off any losses and save tax.
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
Derek wrote:Terryw wrote:That changes things The cost base will be the market value at the date of death.Is that because property was bought pre-1985?
Yep. see item 4 in s128-15(4) ITAA
http://www.austlii.edu.au/au/legis/cth/consol_act/itaa1997240/s128.15.html
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
Most signatures evolve over time.
There is no register of signatures and you could change yours at any time. This doesn't affect any contracts entered into as you would still be the same person – generally speaking.
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
Does your mortgage agreement allow you to assign the debt?
I don't think this would be effective for social security purposes.
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
That changes things The cost base will be the market value at the date of death.
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