I really want to start investing to create positive cash flow so I can stay home with the kids, atleast part time.
Before I start I know I need to get the structure right. I want to go with a company ATF a family trust (this worked well for my previous business so I understand how it works), but I also think its wise to have the lifestyle assets in my name and the investments in my husbands name (as sole Director of the company) – do you agree?My problem with this is that our house is in both our names? We are mortgage free (or we could be if we applied all our off-set account savings to the mortgage), so can you tell me what it will cost to transfer the house into solely my name (we live in Sydney) – is it just stamp duty and is it on 50% or all of the property value – does a valuer determine the value??
Assuming I decide its worth the cost and we transfer the family home to my name, am I correct in believing that it cant be touched if anything were to go wrong with our investments (ie. default or law suit)?
Finally, sorry Im really picking your brains now, who thinks we are better off selling and renting to use the cash for investing in property? Part of me wants to do it but we would then have to pay rent with after tax dollars, so if there much/any benefit to doing this given we have no mortgage on our home (nb: if we keep the home we would need to take a LOC to use for deposits and closing costs.
Appreciate any advice….feeling a bit stuck
Transferring the house into your name will result in stamp duty in NSW. This will be assessed on the value of the transferred amount at market value.
This won't result in much asset protection at all. Have a look at the Bankruptcy Act sections 120 and 121. If you transfer it without consideration for asset protection purposes it can be clawed back indefinitely. If you transfer it for full market value with money changing hands then it could be 5.5 years depending on the circumstances.
You would be crazy to sell and rent in my opinion. Your main residence will be the only CGT free asset you can get so why not have one. You will also be paying rent where you otherwise wouldn't.
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
Terry is an expert on Asset Protection / Estate Planning so listen to what he has to say.
Transferring the property will not benefit you and will only cost you duty as explained.
In regards to going forward you would want to discharge your current loan and take out an investment line of credit rather than utilise any redraw etc and then use these funds for deposits / loan to the Company / Trust for acquiring the new cash flow positive assets.
Get your Broker to shop around as you will be suprised the difference in cost when it comes to application fees / interest rates etc for "cash out" loans.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Thanks Terryw, understood, will NOT trasfer house into my name.
I understand what you are saying about the PPOR being capital gains tax free, but we only plan to rent for a few years then purchase again. In the meantime we will rent a property for less rent than the interest we get from having our money in the bank (or for less than the return we are getting on the investments we are using the money for) will give us, so we will still be ahead. We are also not that attached to our house and do want to sell and move on anyway (for various reasons) it has always been a case of when to sell and whether to buy another house straight after or wait a few years.
I am still confused about the ownerships structure – in Steve Msknights books it talks about the best structure being that one person owns the lifestyle assets and one owns the investment assets. If we keep our current house then we both own our lifestyle asset and if the new investment line of credit is against the house then I guess you are suggesting that we would both own the investment properties too.
Am I missing something or is it not that big a deal to both have ownership over all assets?
I think it is generally best to own the main residence in the name of the person who is less likely to be sued. This is often the wife, but not always.
Then for investments in growth assets such as property you need to weigh up land tax and other negatives and then if you do go ahead a use one then set this up under a company as trustee for a discretionary trust with the risk taker in control as director. Sometimes the ship sinks and sometimes the captain goes down too. The safe person also need to avoid giving personal guarantees.
Sometimes there is a toss up between staying very safe and/or moving forward. eg the risk taker may use up their borrowing capacity. If that is the case then best to form a new trust with the safe person in control to maintain some separation.
Selling your house and renting for a while is another matter. I think you should does some calculations and see how it goes. If you do decide to do it then you could group and plan the purchase of the new main residence in the future an some asset protection strategies for this.
Also consider moving in to a new house and then out again and take advantage of the benefits of claiming all expenses and still maintaining the house CGT free for up to 6 years.
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
No Victoria just because the property is in 1 entity and the loan secured against that entity is in the same named the property being purchased could be in any name / entity.
We do it for clients all the time.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
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