Can any of you who are familiar with lease options tell me if the holder of the lease option can claim the depreciation and the negative gearing benefits of a property that they have an option to purchase on as long as they're subleasing it and intend to exercise the option?
I am asking because I am selling a property in East Brisbane, and was wondering if I could target investors (not just the usual first home buyers)?
The townhouse is only 3 years old and the owner of the property is happy to give the depreciation schudual and tax benefits to the investor/buyer if it's possible to do so. If so, I thought it'd be a good selling point to say that in this case the investor technically is only paying $190 per week to keep the property (after they get their rent rebate) and have the usual tax benefits of negative gearing…I know all of you positive gearing people on this forum will blast me about that, but there's a time and place for everything…and it's probably be hard to find a positively geared place for $25k down,
I'm presuming if it's possible, and the investor doesn't exercise the option, they might have to pay the tax office back some money?
I don't think they can because they are just leasing it.
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
Hi dreamlandprojects
Depreciation and negative gearing benefits cannot be claimed by the holder of a Lease and an Option. However there is another way. Have a look into another vendor finance selling process called an Instalment Contract (IC). An IC is regarded as a real sale and all State Governments (except SA) pay the FHOG for eligible first home buyers, buying their home with an IC.
As always, please check with your accountant and any other relevant propfessional. Thanks.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Thanks for your replies Terry, and Paul and Karen.
I don’t really want to go down the path of Installment Contracts because then I’d have to go through the rigmarole of having to apply for a Credit License and hear there’s now a long waiting list to do so.
I guess the holder of the option will just have to wait a couple of years until the title is in their name.
Karen and Paul, do you know if an installment contract would trigger GST for the seller? The seller is wanting to sell it, but needs it to be in his name for at least 5 years (he’s 3.5yrs in) to avoid paying GST.
I beleive GST would only apply if the property is new or under 5 years old, your's is 3 years so it may apply.
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
Hi dreamlandprojects
May I suggest you have a look at my most recent post at:
https://www.propertyinvesting.com/forums/property-investing/creative-investing/4333293
to overcome your misconception that you'd have to apply for an Australian Credit Licence.Also, and this is only my opinion and you should check it with your accountant, it's interesting to note that GST in the case you mention is triggered by a transfer of title. Transfer of title is not effected until "completion" of an Instalment Contract and therefore it's only at this point that GST would be triggered.
It may be worthwhile talking to a professional that really understands the various vendor finance strategies, including their various advantages and disadvantages in the taxation area.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
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