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it could work in theory, but what stamp duty savings!
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 say it would be extremely difficult to find an owner to agree and it would be risky to renovate a property you do not own.
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
What do you want to know? I have done a few vendor financing deals before but probably would not do again.
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
Just terminate the contract, get a refund and have the trustee enter the contract and pay its own deposit – if you want to use a trust that is. you can lend the trust the money which it can use to pay the deposit.
Yes, I am happy to take new clients on – I charge $660 for a 2 hour consultation.
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 Terry,
Thanks for your response. Good to hear that it might not be as difficult as I am hearing to borrow through a corporate trustee/trust structure.
I have gotten and paid for legal advice regarding this situation, but now am a bit concerned I haven’t gotten the best legal advice. How could we get asset protection and the main residence CGT exemption? We don’t want to put the property in just my name (it has been suggested and debated) as I also plan to start my own business in the next few years, and don’t want our properties to be exposed to any potential creditors – hence the reason for the trust and a corporate trustee. We also want the advantage of income streaming later on for the rental income, as I will likely be at home with kids in about 5 years time.
With regards to the deposit already being paid, our current lawyer has advised us that we can still change the nominee on the contract of sale as we have not settled yet (the land is still not titled) and the vendor has no objection to us making this change. Is this incorrect? We unfortunately realized our asset protection issues after we signed the contract of sale in our individual names and our trust isn’t set up yet, but we have been told that this can still be changed?
Regards,
CelinaI think you might need additional or further advice.
Although you could do what you are proposing consider the arguments a trustee in bankruptcy could use against you. Research resulting trusts.
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 lawyer and broker specialising in trusts. lending to trustees is pretty much the same as it has always been. Not difficult and not much tightening up.
But I think you need to seek legal advice as there are better ways to structure your set up where you can get both asset protection and the main residence CGT exemption.
Also watch out for the asset protection trap you are falling in – you have already paid the deposit.
Keep in mind that trusts are not legal entities and cannot borrow or enter contracts. It is the trustee that does. Carefully structuring the trustee and the trust can allow for greater serviceability and more asset protection.
Get proper legal advice and tax advice before moving further.
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 all
As title suggests.
While I understand the concept and theory about how when using Interest Only loan, for the first 5 years (or 10 years if I get an extension), I benefit from paying less monthly repayment and even though I pay more interest in the end, but those “more interest” are all in the end tax deducible.
However, I want to use an example..
Suppose let’s say I have a property on 440K loan, with interest rate 4.45% and paying P&I. The monthly repayment is 2200 while it generates roughly 1200 interest per month.
If going with IO with 5% interest rate, then for the first 5 years it is really great, I only pay 1800 while the interest being generated would be higher than 1200 (probably closer to 1400), but starting from 6th year, I need to pay 2600 per month while my rental income wouldn’t have increased by 400 per month (I think it is unlikely)…. so while I am getting more cash on hands for the first 5 years, but starting from the 6th year, I am actually forking out more cash from my own pocket due to increased monthly repayment and rental income not catching up to the increased monthly repayment….
So my question is how does that work out to be “better”?In the good old days people could just keep extending the IO terms on the loans. This is probably no longer practical to do and may not be even possible for most.
Where it was possible it used to help in a number of ways with the 2 main ones being:
a) building up a large cash buffer which could be used for a quicker and more tax effective retirement,
b) lower cash flow allowing more investments to be made.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 even positive cash flow property can hurt serviceability because the notional repayment the lender takes exceeds the cash flow.
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
On a more random note, a query about serviceability in above mentioned trust structure, is an individuals credit rating taken into account when the salary is used to service investments
Yes. but which individual will depend on how the trust is structured.
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
hello can I be held accountable for repairs 10 days after settlement when the purchaser has done an inspection prior to settlement as well as a builders inspection.
Deepends.
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 this a breach of my freedom to live a lifestyle a choose to be able to save and move ahead.
No.
But you will need to prove that the property was your principal place of residence to avoid having to give back any grants and fines.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
Wow, what a banker!
Of course you can have an offset account – even with no savings. Whether it is worthwhile or not will depend on the circumstances. Perhaps they meant that you could not service to qualify for the loan. Hit Corey and his team up for some advice and forget dealing with the banks direct.
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 it could be done, no easy, but possible
You would pay stamp duty and income tax (not 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
Changing names is a transfer so duty and CGT will apply – (limited exemptions for main residence 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
1. solicitor
2. management fees etc
3. the rent
4. no
5. depends on your contract with them.
6. you can’t without a breach of contract or the other party agreeing.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
Recycle debt by paying down the non-deductible main residence debt and then reborrow against the main residence to invest – making the interest dedctible
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 still don’t see you factoring in the ability to borrow against assets outside of super.
Superfunds cannot borrow, with one exception – to acquire an asset. Any equity built up cannot be borrowed against.Outside of super it can be.
So a equity increase of $200,000 side super may equate to $170,000 after tax. That $170k could only be used to acqquire an asset worth $170,000 – if sold. If not sold that is $200,000 returning say 10% pa.
A $200,000 return outside of super may be taxed at 47%- say $100,000 post tax, but this $100,000 could then be used to buy a $1mil property returning 10% pa. If a property had grown by $200,000 you could also not sell but just borrow against this – say taking out $160,000 and buying the same amount of property or a lower amount of leveraged shares.
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
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
There is a lot to consider besides tax.
Some are:
Access to funds – early retirement
Accessing equity and further investment and compounding – with no CGT tax until the sale.
With super the tax rate is 15% with limited opportunities to reduce this, outside of super there is a potential to reduce tax to 0%
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
what about the leverage outside of super?
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