De-facto relationship - Bank Mortgage, Private Loan and Tax Implications

Discussion in 'Accounting & Tax' started by Tex333, 30th May, 2020.

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  1. Tex333

    Tex333 Member

    Joined:
    11th Mar, 2019
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    Location:
    Tasmania
    Hello all,

    Situation:
    De-facto relationship for 5 years.
    Her: owns property in own name. Has a private mortgage with parents (they are not on title).
    Him: Recently sold a property in his name this FY. A few hundreds thousand on cash generating little interest in the bank.

    What we would like to do:
    Take out a bank mortgage for her property, and use the funds to pay out the existing loan with her parents. Have a variable loan with an off-set account. Then for him to 'loan' his property sale funds of a few hundred thousand into the offset account, thereby significantly reducing the size of her new bank loan. His loan to her would be a 'no interest at call' type arrangement, which will be called upon in the event her and him buy a new, larger PPOR
    In return for reducing her mortgage size, he will live in her property rent free (the benefit of rent free would be greater than the amount of interest gained by the few hundred thousand in the bank)

    What we would like to know:
    1. would the ATO consider he is avoiding tax by providing a no interest loan to his spouse (or by living rent free)? This is because he wouldnt be paying tax on the interest it generates through sitting in a bank account
    2. would the ATO consider the loan as a gift, and what are the tax implications of that?
    3. are there any negative impacts from her receiving no rent on her property from me (I can only see a benefit, in that she has no income to declare on what is partially an investment property?)

    Would be grateful for any advice, or anything that we may have missed.

    Thanks
     
  2. Trainee

    Trainee Well-Known Member

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    You are reading WAY more complexity into this than actually exists.

    Your main thing here is to make sure you declare the right amount of CG for the property you sold.
     
    Last edited: 30th May, 2020
  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    1. No
    2. Yes unless in writing. No immediate tax consequences
    3. Yes
     
  4. Tex333

    Tex333 Member

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    Location:
    Tasmania
    Thanks Terry. What do you see as the negative impacts from #3?
     
  5. Tex333

    Tex333 Member

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    Thanks. Will do so. Just wanting to make sure that for this next step and how we use the money is legal and most beneficial to us
     
  6. bunkai

    bunkai Well-Known Member

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    Are you planning on getting married?
     
  7. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    You need specific legal advice but there are implications in many areas such as family law, succession, asset protection, etc