Hi all, we want to subdivide our duplex block and build an additional home and maintain existing property which we own outright.
1. We wish to rent existing property which we own
2. Live in new property. (how long… who knows??)
What is the best way to structure this?
Should the new property be in Trust? By the way, I know nothing about trusts…Will the existing property be CG exempt as it is ou residential property…. looking for answers. thanks.
Marisa
You should seek expert advise on this.
Since you already own the property, setting up a trust will complicate things. It titles are transfered to teh ‘trust’ then stamp duty and CGT may be payable. But since you own the existing house out right and are moving into the new one, it may be better to sell existing to the trust, and use this money to pay all costs assoited with the new one so it is debt free and you have deductible debt on the old one. Very tricky!
Terryw
Discover Home Loans
North Sydney
[email protected]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
Terry has got a good point.
On the face of it you should not have to pay CGT if you transfer the property into a trustwhile it is your PPOR, but you will pay stamp duty.
If you intend to keep the original(current PPOR) home and rent it out, then it would be wise to pay some money now ( cost of good advice on the use and setup of a trust, setting up cost of the trust, stampduty on the transfer) and have the structure in place for future use.
Alternately, if you leave the PPOR as is ( in your own name I assume) then when and if you sell in the future you will need to apportion CGT due on the basis of the time you used it as a PPOR and the time it was rented out.
Also, unless you are cashed up to do the subdivision and building, then if you borrow against the existing dwelling for the new PPOR, the interest cost will not be deductible…not effective use of debt.KP
Thanks Terry and kp,
Still looking at costs and may not proceed as I think site costs alone will probably kill the project. If I do proceed will seek professional help.
Cheers
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