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Loan/Title Structure for tax maximisation

Discussion in 'Accounting & Tax' started by Zelph, 12th Jul, 2016.

  1. Zelph

    Zelph Member

    Joined:
    16th Jul, 2015
    Posts:
    10
    Location:
    Melbourne
    Hi All,

    I am about to purchase a property with 2 other parties with the intent to sell within 5 years hopefully. The property is a bit unusual being over 15 acres, non residential at this stage but within city limits.
    One of the guys will not be on the loan or title so how we deal with him is not relevant here. The other one and myself will be taking the loan out with me being the main income earner and he offering a sizeable deposit of $500,000.

    We want to structure it right from the start. We currently plan to put both our spouses on the loan/title as they both have no income and probably wont moving forward. So my questions are:

    1. What are the differences between the loan and title and impact of who goes on what and
    2. What is the best structure here to maximise tax advantages.

    I would imagine having the wives on would limit the interest and other deductions that could be made as everyone would have a quarter and I as the highest income earner wouldn't receive all that benefit but on the flip side when it comes to sell the CGT would be split between the 4 as well.

    Is anyone here able to offer some thoughts on this or can someone recommend a forum member I could liaise with directly on this.

    Thanks
    Steve
     
  2. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,374
    Location:
    Sydney
    Legal advice would be the first thing to consider. Esp loan v's title issues.
    Personal tax advice would be a close second.
    Finance advice also I suspect.

    Its possible that the acquisition is not going to result in neg gearing and no deductions. No CGT issues too I suspect. Its just land ? Profit making intentions are a whole different issue.

    You may need a partnership agreement or structure ownership around how profits are to be shared. This could affect loans and interest too. Normally lenders dont lend to two people and allow 4 on title.

    My developer toolkit may help give some ideas around many of the issues incl GST.
     

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  3. Zelph

    Zelph Member

    Joined:
    16th Jul, 2015
    Posts:
    10
    Location:
    Melbourne
    Thanks Paul,

    I will take a look at the toolkit. There is actually a house on the land we plan to rent out.
     
  4. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,374
    Location:
    Sydney
    15 acres ....1 house. Tax issues there. Tax outcomes can depend too on if there is a DA hanging over the site....Easy to argue primary purpose is to profit. The ownership / financing issues seem to say as much. Full deductability on house and land ? Doubtful.

    A range of issues that really need to be explored before you proceed. You may need a VERY good broker involved as credit may have a range of concerns / servicing etc. Terry Waugh may be a ideal start point. He is a lawyer, broker and knows tax well.
     
  5. John Bone

    John Bone Well-Known Member

    Joined:
    9th Feb, 2016
    Posts:
    62
    Location:
    Melbourne
    You should consider buying in a unit trust with the units owned by each members Discretionary trust. You should not put your spouses in either trust structure, you will just make them jointly and severally liable for loans so the debt will be recorded against them as well as you. Ownership of the units in a discretionary trust will automatically give you the right to distribute to your family in a tax effective manner. The number of units held in the unit trust will determine the profit split, no arguments. You need the advice of a good property expert such as Pacific Law on the Sunshine Coast, they deal Australia wide.