I have read that book and found it so full of holes it is not funny. The author doesn’t appear to be a lawyer and completely misses many areas that need considering while making mistakes various aspects that she does mention. I wouldn’t recommend it.

If the property is subject to GST then you would have to pay the vendors 10% extra. an extra $50k in your example possibly.

You had better seek legal advice before signing this.

If you can sell and make money then it may be worth considering, but there is a fair bit of risk involved. What if values drop and you cannot sell for example.

I think you probably couldn’t claim the interest until the property is sold.

1. GST would generally be calcuated on the sale price of the property while it is new.
There may GST inputs you can claim.

2. Depends on the circumstances. If your intention is to build and sell then the interest would be a capital expense.

Transfer to a trustee or a declaration of trust with no transfer will result in both stamp duty and is a CGT event. There are also asset protection consequences which will vary depending how you do it.

In short you would have the following costs:
legal advice
conveyancing
loan exit fees and mortgage discharge
trust set up
stamp duty
CGT
new loan fees (if any)

However, it may still be worthwhile doing where there is still non deductible debt on the main residence. I am doing one now for a client for a $1mil property.

Yes there will be tax issues, a few in fact, if you borrow money and deposit that money into the offset account. Don’t do it without tax advice.

Wez2014 wrote:

Ok thanks, could you please explain the 5 yrs rule to me? As people have said hang on to the unit/s for 5 years…
Thanks :)

Basically a property is considered ‘new’ for 5 years and GST is chargeable on the first sale of new property.

Codie wrote:

Thanks terry, those are defiantly the questions I don’t know the answers or pros & cons on.
Would you give your opinion on those 3 things?
Borrowing capacity (in my mind this is well increased because 4 people are able to service it.
Joint liability (also in my mind this is a good thing, things turn pear shaped for 1 individual there’s still 3 to carry the load)
Land tax (something I know nothing about, would have thought it would be no different as to 1 person buying)
Speaking to my accountant was vague, hence why I’m looking for another one. But as far as options go, a simple company sounded far easier than going with a trust structure.

Serviceability will be increased for the 4 people as a group, but if one of the persons wants to buy something on their own separately then they will be assessed on 1/4 of the rent, but on the full debt. THis will hurt their serviceability.

Also all 4 going separate may result in a similar borrowing capacity overall compared to 4 together, although it may be slightly less.

Another way is to buy separately early on with 4 coming together later once the individuals cannot buy.

Joint liability is not good because of the above, but also more importantly because one person can drag the rest down. As a lawyer I sometimes have seen one joint owner do a runner leaving the others to take the load. Once spouse and his wife purchased a house together as an investment with the value dropping. He disappeared leaving her to keep paying or default. This was made worse by her parents guaranteeing the loan.

Land tax varies from state to state, but generally one group of owners will be assessed as one person and therefore get one threshold (In NSW anyway). I just spoke to a NSW client with 4 investment properties jointly owned. If he split up the last 2 which hadn’t settled yet he and wife will save around $7000 per year – which is a huge sum.

A trust or a company (or several) may work out better.

If you were a resident of Australia you may have committed an offence by not declaring your UK income. Maybe you mean your Australian income was less than the taxable threshold?

I don’t know if you need to declare the loss or not but wouldn’t it be good to have loss which could be carried forward to offset future gains?