Beneficiary of Family Trust Buying Property

Discussion in 'Legal Issues' started by lettert, 11th Dec, 2019.

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  1. lettert

    lettert Well-Known Member

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    X is a non-named beneficiary of a family trust (parent of named beneficiary)
    X is a first home buyer and buys a property in Vic less than 600k, gets the FHO benefits etc

    After a year or two, can X transfer the property to the family trust? Any issues there?
    If a named beneficiary purchases the property from X after a year or two, are there any ramifications?

    edit to add - X and named beneficiary have a joint bank account, if relevant
     
  2. Trainee

    Trainee Well-Known Member

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    What is the point here? Considered stamp duty costs?

    What does transfer the property mean? Gifting?

    Will X still reside in the property?
     
  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney

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    1. Yes, heaps of issues to consider - loan, tax law
    2. Yes, heaps of issues to consider - loan, tax law
    3. irrelevant
     
  4. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Mortgagee permission
    Refinance
    CGT
    Duty
    Loss of main residence exemption
    Land tax perhaps (Vic may be excepted)
    Legal costs
    Neg gearing issues in a trust
    ....and many many more
     
  5. lettert

    lettert Well-Known Member

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    It seems that especially when considering CGT it might be simpler for X to sell rather than transfer to trust

    A (named beneficiary of family trust, son of X) could purchase in his name, but would lose FHO benefits since he's not a FHO.
    Purchase can be made with cash, so no loan issues
    X and A are both Australian residents for tax purposes
    X has no income so no negative gearing benefits once he moves out and place is rented, but the trust has income so negative gearing benefits might arise?

    X would possibly live in property for 3 or so years before selling or transferring - transfer to trust seems to make more sense given the short holding period but all the other issues arise then... :/
     
  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney

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    CGT would be the same if sell or 'transfer' (which I think you mean gift?)

    A trust could only negative gear if the income from the property is less than the expenses. Without a loan it would probably be cash flow positive.

    Nothing is making sense on what you propose. Why doesn't the trust just buy the property first up? If this is just to get the grant then surely the stamp duty and conveyancing fees would be more than the grant?
     
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  7. lettert

    lettert Well-Known Member

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    Thanks @Terry_w - yes, this is for the grant and stamp duty exemption. Once the property is gifted to trust (what expenses are incurred for this?) I'm assuming the trust could take a loan on the property, which would then lead to the property possibly being negatively geared...
    Could X gift the property directly to A? What expenses would be incurred then?

    Buying upfront by A is one option, just considering other options, of which the FHO grant and stamp duty exemption looks interesting.
     
  8. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney

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    If the property is gifted to the trust what is the loan for?

    Any transfer of title has to consider
    a) duty
    b) CGT
    c) conveyancing fees for each side
    d) discharge of mortgages etc
    e) legal and tax advice.
     
  9. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Buying any property just for a grant seems illogical. It will likely reflect as a trivial discount on the cost over time.
     
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  10. Trainee

    Trainee Well-Known Member

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    If you can afford to gift a property with no mortgage to a trust, incurring stamp duty, are you really going to care about the grant and stamp duty concession especially given the trouble of (presumably) having to move into it, then out again?
     
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  11. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    People with more qualifications than I have spoken but I don't think you could take a loan on the property to make that particular property negatively geared if it was gifted. If the Trust is given the property you can borrow against the property but it would need to be a tax deductable purpose such as buying another property/shares

    This sounds like a very convoluted process and it might be clearer if you could say what you are trying to achieve than ask if X, Y and Z is possible.
     
  12. thydzik

    thydzik Well-Known Member

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    lots of issues.

    Main one is FHOG will most likely be less then the stamp duty to transfer, so no gain.
    Buying in a trust from the start will still make you eligible for the FHOG at a later date.
     
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  13. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    I have seen a trust used to defer access to the FHOG and then it is refused later when the individual buys a home. Its essential that the trustee is a company. The terms for first home concessions (grants and duty) consider the legal ownership.