IS A FAMILY TRUST THE GO??? I am looking for a way to minimise my tax. My current situation is my partner and i earn the same income (combined $100,000+). We have 2 kids. I have a residential unit (principle place of residence) purchased 3 years ago for $400,000 and a current mortgage of $340,000. My father is going to purchase my unit in Nov 2011 when he retires as an investment unit.
Therefore in 3.5 years, we will sell our unit to my father for $400,000 making no capital gains (given the current realestate market) . Thus i am looking for a way to turn my unit into an investment unit without moving out. Hence minimise my tax.
My thoughts were to move my unit into a FAMILY TRUST, (understanding that stamp duty will be payed), then rent it back from the trust. Deduction could be made like a regular investment property, however my question is this:
could the Family Trust gift the unit to my father when he retires, allowing for him to pay no stamp duty to the government, only to me to reinburse my previously payed stamp duty when setting up the trust? Are there better ways?
If you transfer it to a trust now you will incur stamp duty and lose the tax exempt status of the place. The trust will also probably run at a loss which you can only offset against other income of the trust, not your own.
Can't see how transferring it to a trust can save you any money.
If you transfer it into a trust you can just hand over control of the trust to your dad later on, without transferring the property and without CGT and stamp duty. This may not suit your dad's situation though.
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
Sorry to point out the obvious, but in 3.5 years when you sell it for $400K, you will in theory be losing money as it will surely be worth more than that. Apart from being benevolent to your Father, is there any reason you would do this? You need not worry about CGT as it is your PPOR and you wouldnt pay it anyway if that was the motivation for the $400K sale price.
MickThe sale of the property for $400K was just to make the point, sale price is not important. If he pays $400K, he will give us more in reality on the side. I am just looking for the best way to minimise my tax bill over the next 3.5 years. Any deduction on interest paid on loan would be much appreciated. Which brings me to my next question.
My home loan has a redraw facility. We currently have surplus cash sitting on the homeloan. If i redraw said cash to invest in shares, would my interest repayments on this money be tax deductible.
Eg. redraw $100,000 from home loan (current rate 8% or so) to invest in shares. Does interest debt on $100,000 ($8000) become tax deductible?
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