CGT probably won’t apply.

Assuming it does,

get a valuer in and work out what each block is worth. This should give you a % which u can use to apportion the original price and costs. Any specific costs to each block should be taken into account for the cost base for that block.

You cannot cut in in half because one block has a house.

I am a tax lawyer in the CBD and provide advice on structures/

Non owners cannot go on loans – they can, but no bank will allow it.

Your best option is a reverse mortgage – not sure why you think it not applicable.

Another option is to transfer part of the ownership – but stamp duty, CGT and other consequences.

Your MIL needs some good legal advice on the consequences.

Make sure you seek legal advice.

Brokers cannot provide tax advice – unless they are also tax agents or tax lawyers. but many of them do provide tax advice and get it wrong.

the best way would be to borrow the deposit under a separate split secured by any property and then borrow the remaining 80% secured against the new purchase.

Don’t use redraw

Hi Gavin

This quote seems to be from material is copyright – do you have authority to post it?

This is standard asset protection stuff. The gift and borrow back strategy has been around a while and some lawyer even tried to patent in years ago – but failed.

But,
Creditors can still attack these schemes under both state law and commonwealth law. S37A of the Conveyancing Act NSW for example covers transfers designed to defeat creditors and a mortgage or lien is deemed to be a transfer for his section of the Act. Each state has similar, though differently worded, legislation. Bankruptcy Act also covers this.

If you are not trustee of the trust or in control of the trustee there is asset protection risk here. Even if you are the appointor there is a risk the trustee could do something before you have the chance to sack them. It would greatly help if the trustees were not beneficiaries and could not indirectly benefit themselves somehow.

You also have to consider what would happen on your death. If you have no equity there is nothing that can pass via your will. Whoever gets control of the trust(s) will control your assets and this is serious stuff and needs careful planning. It could be a disaster if you have more than one child for example.

Overall it sounds like a good strategy. It can’t be fail proof, especially in the early years, but it can be very strong if everything is done correctly and the strategies are followed.

I just had a client sell the former main residence to a fixed unit trust. They borrowed to buy the units in the trust and can claim the interest. The borrowed money will then be used to pay off the new main residence debt.
ATO allowed this under a private ruling application. No CGT payable, but stamp duty was payable in full – however they will get years of extra deductions which will cover the stamp duty costs in a few years.

If you want asset protection from creditors then there is only one solution – a trust. That is a discretionary trust or a SMSF.
But the strength of the asset protection will depend on the terms of the trust and the structure of the trust.

You could also buy assets in the name of someone else – but this is really a trust like relationship which can be challenged.
E.g. a husband buys assets in the name of the non working spouse – he pays the deposit, pays the loan and does all the work. If he goes bankrupt it could be argued that the wife is trustee for the husband and it is really his property.

The husband will also have additional asset protection issues – family law if the wife leaves him, succession law if she dies, incapacity – what if her mother as attorney takes control and what if the wife goes bankrupt. Also he has lost control – she can sell, mortgage, lease or leave the property in her will.

With trusts, the trustee borrows. Where the trustee is a company the company will borrow with its directors and 9sometimes) shareholders giving personal guarantees. So any serviceability will be based on the assets of the trust and their income as well as the income of the guarantors.

I don’t understand what you mean.

Example

John has a loan of $80,000 secured by an investment property with plenty of equity. The loan relates to the purchase of that investment property.

John now needs $20,000 for an urgent kidney transplant.

John increases his loan to $100,000.
Going forward 80% of the interest should be deductible.
This is a mixed loan

But just should not increase his loan like this. John should have set up a separate split of $20,000 and kept his $80,000 loan as is.
This way John could pay down the $20,000 and keep the $80,000 as is. This would not be possible with the mixed loan because any repayment would also come off the $80k portion too.