charliefaddoul wrote:

I am receiving conflicting views from my lawyers and accountants and it is making it very difficult for me to understand things.

It doesn’t matter what an accountant says as this would require legal advice.

charliefaddoul wrote:

One of the things I have been told by my lawyer is that holding property in a trust won’t protect your assets from creditors if I ‘benefit from’ the property.

This might be taken out of context or is a bit vague. First what are you trying to protection the property from? Creditors on bankruptcy? A trustee of a discretionary trust can still hold a property and let a beneficiary use it, perhaps rent free, if they have the power to do this. the property could still be safe from creditors on bankruptcy of that individual beneficiary. but there are still many potential ways the property and the trust could be attacked. So it largely depends on how the acquisition and funding of that property was structured within the trust.

charliefaddoul wrote:

Therefore, I have been told that it does not matter what legal entity the property is owned by, as if creditors are chasing any money, my assets would be exposed, regardless of what structures they are in.

You say ‘my assets’ but seem to be talking about a different entity holding the assets. If they are yours then they are available to creditors. If they are held and owned by a company, for example, then at first brush they are not your assets – but who ownes the company, how did the company acquire the property, how did it get the deposit. All this determines the strength of the protection

charliefaddoul wrote:

My accountant gave the opposite advice, stating that the assets would be protected.

They would not be qualified or knowledgeable to give this advice – or covered by insurance.

charliefaddoul wrote:

Can anyone confirm this or provide an alternative view as it is becoming increasingly frustrating when the advice from accountants and lawyers do not match up?

I am a tax advisor and a solicitor (and lawyer) and your understanding seems to be defective so you might be asking the wrong questions and getting answers to these instead of learning how a trust or a company could help reduce the likelyhood of assets falling into the hands of creditors.

There are none in Australia as far as I know

speak to a town planner to see if it is possible to do first.

Mat-23 wrote:

2 – Our home we live in – is the property that is our business premises – seperate section of the building – so we claim the portion of that property for  tax that is used for our business – but not our living space.

This doesn’t sound good to me. I think you should get some alternative tax advice – might be too late to fix things though.

At the very least it might be worth shifting the cash in the offset to the loan on your main residence and to break this fixed period.

You could also consider investing in a different entity, a more tax effective one, and shift offset cash as an interest free loan to this entity. This will increase your deductions in your own name and shift a large chunk of income to the new entity.

If the trustee is going to borrow money it might as well open an account at the same bank it gets its loan from – ideally an offset account.

They are statements not questions

but

1. No that is not correct

2. No that is not correct – loans have no bearing on CGT

It is possible, but something you should seek specific legal advice on.

It will depend on the circumstances, such as, if PI or IO, what the expenses are, how long left on the loan, type of property, type of tenancy, yield etc

Assuming PI residential rate with minimum expenses it would probably neither improve nor decrease serviceability

Steve, you have confused terms here or conflated ‘borrowers’ with ‘mortgagors’.

Mortgagor is the one who gives a mortgage

Borrower is the one who borrows the money

usually but not always they are the same

e.g husband owns the property and husband and wife go on the loan. Husband is the mortgagor and both are the borrowers.

You cannot be a mortgagor without being an owner – it is impossible to mortgage something you don’t own. A mortgage is the security for the loan.

A guarantor is one who provides a guarantee. There are 2 types

a) security guarantee who the guarantors property is used as security. parental loans where the parents property is used as second security for the adult child’s loan so that no deposit is needed.

b) Income guarantee. These are only allowed for company borrowers and spouses generally. A new company has no income so when it borrows the lender will rely on the income of the guarantor – which will be all directors usually.

A guarantor is only liable for the debt if the borrower defaults.

That can work out well in limited circumstances, but in these days of low interest rates the trust would soon make a profit on the property that it rents to you and that income would be taxable income where it otherwise wouldn’t had you bought in your own names. Also have to factor in land tax on trusts if buying in NSW and VIC, plus the estate planning aspects.

Seek legal advice before trying it.