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Viewing 20 posts - 481 through 500 (of 16,319 total)
  • Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    Seek legal advice before the trust does anything.

    You will probably get a cheaper rate by drawing from your home loan and on lend to the trustee but many legal, tax and lending issues to consider.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
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    @terryw
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    Yes worth considering.

    I have a client going through this at the moment in Sydney and he is looking at getting double what the property is otherwise worth.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    You could potentially lend your personal money to the SMSF to do this, but watch out as this could result in NALI income non arms length income which would be taxed at 45%.

    read some papers by lawyers
    A good one is
    http://www.13wentworthselbornechambers.com.au/wp-content/uploads/2016/10/2016-SMSFs-and-Property-Development.pdf

    and
    https://sladen.com.au/news/2014/9/8/smsfs-engaging-in-property-developments

    Beware of anything written by a non-lawyer.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    Hi Rod

    It is hardly complex. Split the loan, pay it down and reborrow. Once you have sold the investment the loan can be paid down and kept open for next time. Little effort is needed.

    Saving $2000 would be equivalent to 4 weeks work for some people.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    Sorry Terry I don’t think I follow. Could you please explain further?
    I thought keeping the cash in an offset tied you your PPR would be most beneficial as this interest is not tax deductible?
    Cheers
    Rod

    It is the most beneficial. But what happens if you take the cash out of the offset and use it for investment properties?

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    Hi Warren

    You really need legal advice on this as it relates to trust law and the interpretation of legislation.

    “We are very close to purchasing 2 properties through our SMSF”
    The trustee of the SMSF may be close to purchasing 2 properties.

    The trustee cannot use borrowed money to develop.
    You cannot develop the properties that you don’t own, but the SMSF can as long as the fund isn’t using borrowed money. You also have to be careful about your involvement.

    Have you considered a widely held unit trust? 3 unrelated SMSFs could hold units in the unit trust with the unit trust borrowing and developing.

    Could the fund develop one block at a time?
    Could you buy jointly with the fund? You could borrow to do so, but not mortgaging this property.
    2 separate SMSFs owning one each or both as tenants in common?
    Joint venture with a builder and the SMSF?

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    Yes the valuer can access and do the valuation. But to get formal approval the titles really need to registered as otherwise what do they put on the mortgage documents.

    I got a valuation for a client the other day for a subdivision that hasn’t been registered yet.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    Trouble with this, Rod, is that when the cash is used the interest on the home loan would increase. This interest would not be deductible.
    If on the other hand you had borrowed up to 80% and stored any excess cash in the offset account, when the time comes to use it you could split the loan, pay off one split and reborrow and use those borrowed funds to invest – then the interest could be deductible. For every $100k used this would increase tax deductions by about $4,000 per year which means savings of up to a bit less than $2000

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
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    @terryw
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    Post Count: 16,213

    Similar to Corey, I would borrow as much as possible and buy a main residence and then debt recycle the debt down.

    This will have tax and other benefits
    – nice large CGT free asset going forward
    – no rent being paid
    – owner occupied rates on investment.

    e.g your borrowing capacity is $600,000. You could buy a property for $750,000. Use an 80% loan of $600,000. Split it appropriately form the start – perhaps one loan of $200,000 and one loan of $400,000.

    After settlement pay off the $400,000 loan and reborrow this to invest. Interest is now deductible.
    Pay all wages and rents into an offset account on the $200,000 loan remaining as this is not deductible. Pay off the remaining $200k asap and reborrow that to invest further.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    Yes you can, but both duty and CGT would be assessed at market value. This would not save you the hassle of doing the CGT return, even if there was no legitimate profit because the sale is a CGT event and you would need to declare it on the tax return. There are also asset protection issues to consider.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
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    @terryw
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    But this is legal advice and a broker shouldn’t be giving advice on trusts. An accountant couldn’t even advise on trusts like this and financial planners even less. Best to leave trusts to the lawyers I think.

    Your definition of trusts is wrong. A trust is a legal relationship where one person holds property for the benefit of another under obligations. A trust may only need an ABN if it is in business.

    A discretionary trust is a type of trust in which the trustee has discretion as to which beneficiary to distribute income and/or capital to.

    Asset protection with a discretionary trust arises from the bankruptcy of a beneficiary. The assets of the trust are generally not property that can fall into the hands of a trustee in bankruptcy. If the trustee is sued, however, the assets of the trust will be at risk because of the trustee’s right of indemnity.

    “Beneficiaries not being registered in the trust deed” – this doesn’t make sense. A beneficiary doesn’t need to be registered in the trust deed. A person just has to be a beneficiary which could be possibly without them even being named in the deed.

    Holding costs for trusts can be nil upwards. There are accounting fees which will depend on what the trust does. A trust holding one property may be $600 or so. Not sure what governance fees are.

    The whole section on loans is misleading.
    A trust is not a legal entity so the property cannot be in the trust name. The property and loan would be in the name of the trustee. The trustee would generally be the borrower with any individual director of the trustee giving a guarantee to the loan.

    I would say probably 95% of lenders lend to trusts.
    Some lenders do charge higher rates, but generally the rates will be the same or similar to loans to individuals. Westpac are generally not good for trusts, but St George are great.

    Borrowing capacity could be greatly improved with a trust – I have written a thread on that here somewhere. Can’t say I have ever encountered a lender insisting on a 25 year loan for a trust. Some lenders do charge a fee for their solicitors to review the trust deed to make sure the trustee is allowed to borrow and mortgage – fees are about $300 to $400 usually.

    Etc etc

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
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    @terryw
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    Post Count: 16,213

    Bloody hell Steve, are you the author of that booklet? The author appears to be a mortgage broker with no legal qualifications. There are some good points in there, but many errors, especially about the finance and asset protection side of things.

    Why would a mortgage broker write about a complex legal arrangement such as trusts?

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
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    @terryw
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    Post Count: 16,213

    Well lots to consider. You really need to do some reading and then seek specific legal advice.

    Perhaps work out the costs first.

    I have only ever had a few clients who have done this a and they had heaps of equity so it was done as part of a debt recycling strategy as well.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
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    @terryw
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    Why do you want to transfer the property to a trust?

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
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    @terryw
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    It’s like buying a book. Doesn’t matter if you are registered or not, but sale price includes gst. If you are registered you can claim the gst if not you wear it.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
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    @terryw
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    Why a financial planner? This doesn’t involve financial products so licensing needed.

    The only way to retire on negative geared propertied would be to either sell one, borrow against one, or wait till the positive cash flow is enough. Or a combo

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
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    @terryw
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    Prob a serviceability issue. Short term loans will have very high repayments compared to same loan over 30years

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
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    @terryw
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    Post Count: 16,213

    extending loan terms to 30 years if possible can help
    Changing from IO to PI can also help
    Other than this it is maximising income.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
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    @terryw
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    Keep in mind it has a few errors and is overly simplistic so don’t rely on it too much, but I think it can be a good intro.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
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    @terryw
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    Post Count: 16,213

    It will depend on the terms he has agreed to with the agent. Most of these agreements would state that where the agent introduces a buy the agent will be entitled to a commission even if the purchase/sale agreement is entered into after the lapsing of the agent’s appointment.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

Viewing 20 posts - 481 through 500 (of 16,319 total)