Buying real property as a trustee is often a mistake, especially in NSW because of land tax. 1.6% of land value in tax per year for a property can be a killer.

e.g $400,0000 land value = Nil tax in your own name (assuming your first property) but $8000 per year in land tax every year. That is a huge difference.

Add in the fact that a trust is treat as a separate tax entity so any losses cannot be used to offer your personal income could mean another $2k to $5k pa to hold in the early years.

Setting up a cheap online trust can also cost you more, much more because of errors, wrong terms, wrong party in the wrong place etc.

This is why you need legal advice.

this doesn’t make sense! Borrow at 9% and invest at 5%?

Contracts for land need to be in writing to be enforceable. But they could probably enforce an oral lease becasue of the RTA. What about bond – any been collected and lodged with fair trading etc

Worry about insurance too.

If it is still in his name then you haven’t bought it. You may be able to create an equitable interest in the property, but would not be legal owner without title.

Don’t confuse ownership with loans. If he is on title he may or may not have a loan. If he has a loan, ie is a borrower or a guarantor then this is a liability which will be taken into account by the bank..

You could create some rights over the property but that would not change the fact that he has a loan and is the legal owner. Bank wil want to make sure he can service both mortgages

Catinthehat wrote:

<div class=”d4p-bbt-quote-title”>Terryw wrote:</div>
If they owe the money and there is no dispute they would have no choice other than to pay.

They do have a choice. The simply choose not to pay.

Talk to any business that bills on account and ask them how hard it is to get creditors to pay let alone pay on time. The bigger they are and the smaller you are generally means you as a small business or individual are on the end of the payment queue. 90 – 120 days is fairly common. Not only that the outstanding just keeps growing. They often pay less than they incur. Building/construction companies are notorious for not paying what they agree to pay or are obliged to pay.

Then it is a simple process to wind them up.

DanielJ2 wrote:

Any hints for strong set up of trust? I had intended on being the appointor and director of corporate trustee. That way, I have all the control and can alter the trustee if bankruptcy was ever declared as I could not remain director of the Pty Ltd. (I acknowledge that it is very unlikely that Bankruptcy will occur but it happens and I think it unwise to ignore the slim chance.)

Get legal advice on this. It will all depend on the structure of the trust – and watch out for stamp duty implications.

Best to speak to a lawyer and a tax adviser. yes you could enter into a loan agreemennt with a relative and then refinance this loan with a bank loan. Need to be careful as there are many issues.

Speak to a lawyer about issuing a statutory demand under the corporations act. If they don’t pay or set it aside within 28 days you can wind them up.

Woody1986 wrote:

Now, I was wondering who would be at fault here.
1) The broker giving the advice to fix the loan
2) The bank who should have known it is a house and land package and shuoldnt have approved finance for the land without the build.
They are now asking for him to add an extra $40k which isnt small change.

Your mate is at fault. People should take responsibility for their actions! Put it down to a learning experience. it doesn’t seem like the bank has declined the loan, just that he needs to contribute more cash

Collusion – ACCC should be the point of call.