What to do? Structure.

I suggest having your situation reviewed by accountants experienced in property related matters. Check out this website http://www.chan-naylor.com.au This firm has a unique approach to reviewing an investor's situation called a Financial Health Check. You can book this via their website. They have offices in most states. They were voted the fastest growing accounting firm in Australia by BRW magazine in 2007. This was particularly due to their focus on property related matters.

They also have a unique property ownership structure which they have developed in consultation with leading property lawyers and Special Counsel (SC). This structure addresses such issues as assets protection, estate planning, tax minimisation and numerous other issues.

Ed Chan has co-authored a number of books on tax, superannuation and wealth creation. I particularly recommend reading How to achieve Wealth for Life through Property Investing. It is a best seller because it dispels a number of myths and is easy to read.

Good luck

Hey all

My partner and I have just used Chan & Naylor to set up a hybrid trust for the purpose of IP stuff. We have also set up a line of credit with the intention of using this to fund our first purchase (as a deposit). We will then be looking at securing a construction loan as we have our eye on land that can be sudivided. Richard, I see you have issues with using the LOC for deposits? Do you mind explaining why? I would really like to know before we barrel ahead. We haven't got the construction loan yet. Our line of credit (through the bank that gave us the money for our PPOR) is $460,000. We have no debt.

Cheers again

Lucky

Hi Lucky

Yes you should DEFINATELY (Sorry didn't want to use caps but had to make my point) have separate sub accounts for the two.

In saying that Lucky when you email me I will convince you dont need a LOC for personal purposes anyway – lol.

Hey Scottybe,
You should definently seperate out your accounts into personal use and investment use. You may not have to refinance to achieve this tho. You can quite likely go back to your existing lenders and ask them to set up a split for you. Your accountant can then claim the tax deduction for the investment split from that date forward.

As to the questions about trusts.. What's that ad? Oils ain't oils? The same with trusts. Some trusts don't provide the asset protection qualities you're asking about. Do you know the difference betwen them? Neither do I  but that's why you go to the experts. I'd suggest Chan & Naylor as well. There are probably others out there who know what they're doing too, but I KNOW that Chan & Naylor know what they're doing regarding the trusts.

Richard, we appreciate your concern about customers asking an accountant for advice regarding loans. As you suggest, an accountant is an accountant, and such advice is best coming from a mortgage broker, or other lending professional.  Chan & Naylor do work closely with Chan & Naylor Finance, a mortgage broker company, so please lay your fears to rest on that score.

Hi All,

My parents purchased two blocks of land 4 years ago as an investment, financing them through a LOC.

During this period of time, they have been able to make their monthly repayments and the balance has remained the same ever since they purchased them (in other words, they only pay the Interest every month; no principal)

Both blocks are financed through the same LOC.

They have just recently increased their LOC limit to subdivide one of the blocks (Block A) and are looking at building two small units on the subdivided property. The other block (Block they are looking at selling it and purchasing a larger block in the same area to also subdivide. (But at this point in time, only a priority if something attractive comes along on the market).

Unfortunately they are not in a position to finance the construction of the units, however on the other hand, I will be able to at the beginning of 2009.

The plan is to build one house on one of the subdivide blocks, sell it, pay off all debts and have one subdivided block and Block B debt free, allowing me to build on them at a later date or keep as land.

As my parents are in the low 15% and 30% tax brackets respectively, I on the other hand, will be earning $70k in 2009 alone.

I am confused in which direction to go:

a) Do they transfer the titles into my name, I pay the stamp duty and open a trust fund with my parents, me as the trustee and them as the beneficiaries (to minimize tax and to ensure that all expenses, i.e. interest repayments) are claimed for?), and register for GST

b) Engage in a joint venture with them, them providing the capital and me the equity (i.e. me pay the loan)?

At this point, I am still unsure the differences between a joint venture and a trust? I believe it hasn't been clearly identified.

c) Leave it as it is and me make the repayments as the beneficial owner for the construction of the units?

I am thinking the best way is to transfer the titles in my name and set up a trust fund, whereby i pay the maximum profits to my mum (15% tax bracket), my sister (15% tax bracket) and then to my dad (30%) tax bracket.

Does transferring the titles in my name mean that I just pay stamp duty and that they don't need to pay CGT? In other words, they can't claim for their expenses once they have transfered the titles in my name? They have accumulated $40,000 in expenses over the last 4 years.

What price do they transfer the titles to? The balance of the LOC so they can eliminate all debts?

Any advice would be greatly appreciated as I am very confused in which path I should take

Thanks