Hi All,
Just new to the forum so go easy on me.. lol!
Looking at buying a 3-4 bedroom house with large backyard (Land Size 650m2+) with the intention to sub-divide and sell off the rear block to kick start our investing journey..
Any ideas as to what structure and finance to use in our situation, where my parnter and myself are going in as half and my partners parents as the other half.
Any advice would be greatly appreciated.
Thank you
If you don't own any other property you may be able to obtain the main residence CGT exemption on the property initially and the remaining part after sub-division.
Depending on your incomes you may want to buy a larger percentage in the lower income earners name (also depending on when you intend to sell) so that less CGT is payable when the split off is sold.
If not your main residence you may want to look into discretionary trusts (DT). If you want the profits fixed at 50/50 each then maybe a unit trust (can have your units owned by your DT)
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
Thanx Terry!
I earn appox 57K and My partner works PT and earns about 35K but lives at home and has a better savings record than me as she saves about 75% of it. Thinking of me living in one room and renting out the other rooms to uni students. Would I/we be entiled to the FHBG if we go halves with parents or should the parents go as guarantors?? How would this affect structure and TAX?
If my partner and I go into a Unit trust with parents do we forego our FHBGs or since it’s not going to be a home for my partner she can use hers at a latter date?
Sorry if it souds confusing still learning!!
Ta
Sounds like you don't have any other property if you are talking about the FHOG so probably best to get in your own names. If you buy in a trust you won't be able to get the FHOG and won't get a main residence CGT exemption either.
If you buy with parents you could only get the grant if it is they qualify too – ie their first property. All people on the title must go on the loan too, so this complicates things.
Using parents as a guarantor may help with the deposit side of things but not income. eg. your parents own a property and you use that as additional security. The bank will take a mortgage over their property too and this can help you save LMI by keeping the loan under 80% of the combined properties. If the parents have a mortgage then must be at the same bank as you too. This also complicates things and is risky to the parents. It would be better if they just lent you the money. Guarantors have no affect on tax.
If you use a unit trust now you could still get the FHBG in the future (if it is still around) – but you lose on the CGT exemption.
If you rent part of the house out while living there you will lose the CGT exemption on that part.
I think you need to work out roughly what you want to do and then sit down with a tax advisor to work out ways to minimise the CGT and GST on the new block.
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
Thanx again terry,
looks like the parents are best to go guarantors or money lenders then. Might be better to identify what to do by looking at the following deal!
4 bedroom 2 bathroom on 650m2 block with side driveway asking 275k to 300k..
Loan repayments between 400 to 450 per week.
Rent per room to uni students for 130 a week ( 520 for house) all bills and Internet included.
Subdivide back block ( approx 325 to 350m2) and sell between 125 to 150k.So I guess my question is what are the costs I have to consider and how are they calculated when subdividing?
How is the CGT exemption calculated and from when the property is settled how long do we have to wait b4 we can sell the rear block?Thanx again
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