Good afternoon Trend Setters
Any help or guidance you can offer would be much appreciated!
To sum up my situation, I intend to purchase a first home to live in for six months, thus making me elligable for FHOG and then moving back in to board, leaving the property as an investment.
As I'm sure you can appreciate, my greatest difficulty is obtaining a loan from the bank as their calculations give no credit for the plan developed, a contract I have with my workplace for eleven years and my certainity that I can make it work financially. They are transfixed by the notion that I am a low income earner ($31000) for the next year.
If my parents were to take a line of credit (using the equity in their fully owned home as the security) to give me $100,000so I could purchase a home to live in, they would be financing me in a round – about way. When I leave the property if I was to take a line of credit on the purchased property to pay my parents back what are the tax implications? I.e. can I claim the interest from that line of credit on tax since it is now being used to fund my investment property? What would be the tax problems for my parents to suddenly receive $100,000?
I hope this question makes sense and thank you in anticipation of any help you can throw my way!
Regards
Issac
Hi
You just have to document things carefully. what will happen is your parents are lending you money, and you can refinance this loan with a loan at a bank at a later date. Get a loan agreement drawn up and run it by your solicitor – your parents should probably take a mortgage to protect their interests. They would charge you a interest rate matching what they are paying their bank. So their interest from income will equal their deduction from interest paid to their bank. This will leave you with the interest to be claimed.
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
Terryw thanks very much.
I'm still unsure as to the tax implications for my parents when I return the $100,000 'loan' to them…does the tax department view this as a form of income for my parents even though they lent it in the first place? Would a document detailing the loan period between my parents and I somehow avoid them paying tax on the returned $100,000?Issac
Issac
No the interest they receive will be taxable income offset by the interest they are being charged by their Bank but the repayment of the loan will be of a capital nature and not taxable.
If you paid them back say $120,000 then the $20,000 would be Taxable
Richard Taylor | Australia's leading private lender
Just think of the parents as a 'bank'. They are just lending you money with you making repayments to them the same as you would be if you borrowed the money from a bank.
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
Thanks very much for the information. I believe this is the best way for me to gain the funds necessary to get into the property market.
Regards
Issac
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