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Company Property Purchasing

Discussion in 'Property Finance' started by Tony Fleming, 2nd Dec, 2015.

  1. Tony Fleming

    Tony Fleming Well-Known Member Business Member

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    Location:
    Sydney
    My wife and I run a part time business through a company structure both directors(terry w I know you are already shaking your head in disappointment) essentially she has a paid credit default which expires in July next year. She has found a property she would like to buy as she has been itching to buy her first personal IP. She has done all of her own research and enquiries and I'd love to be able to help her get it. She has a 28% deposit on the price plus the stamp duty, conveyancer etc (personal money). I doubt she will get finance so would it be possible for me to lend her the remaining funds and have the company pay me back the interest and principal until the property is able to be refinanced to a bank under 80% lvr and once her credit has cleared? I know with APRA changes they have affected the cash out policy so my questions are.
    1. Would it be possible to refinance to a bank once her credit is clear also it happens to coincide with our business being open for two years(that helps with finance right)
    2. How will my serviceability be effected by having a loan to myself?
    3. Do normal taxation rules apply. Since its my finance can she still (god forbid) claim negative gearing? Pbviosuly i'll have to pay tax on the income generated from the interest earned
    4. Any problems with this process?
    Any help would be greatly appreciated :)
     
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  2. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    Location:
    Adelaide, SA
    What's the value in placing the purchase in a company structure than in her personal name? Weigh this up against the cons.

    1. you just need to setup a loan agreement between yourself and the party borrowing the funds (in your example the company, perhaps a better option being her personal name). Then it's a simple refi when the time comes, not a cashout for 80% of the value of the property.
    2. Once again, if in personal name lend you won't have a liability so will no cause issues with servicing
    3. Corporate structure? Doesn't have anything to do with her personal taxation. In personal name, just the same as any other loan.

    I think you really need to consider *why* you want to put it in the company compared to other options available? Sometimes people make things needlessly complex which cause longer term problems.
     
    Last edited: 2nd Dec, 2015
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  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Lol!
     
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  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Location:
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    So you want to lend her the money, but have the company repay her debt? Some issues here.

    If you lend her the money she could refinance your loan with a bank loan. But for the interest to be deductible you will need to make sure your loan is on commercial terms.

    1. Yes - as long as all serviceability etc is met, I am doing one now for a client. Need to make sure it is all evidenced or it would be treated as a cash out.

    2. You cannot have a loan to yourself. You would have loaned to someone else so this is not a debt to you.

    3. if set up properly.

    4. potentially.
     
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