i feel like this is a dumb question but i just randomly thought of it. so say your friend has 5 properties in a corporate trustee structure. and you have already maxed your borrowing capacity. can you transfer those properties into a different company that you own? or make your self the director of the origin company that is the trustee for the 5 properties? the idea is when borrowing capacity is maxed. you could still get more properties this way and not paying stamp duty / fees. would any of this work?
Won't work Your friend wouldn't 'have' 5 properties. They were be owned by a trustee. You friend may control the trustee though. He or she would probably have given the lender a personal guarantee. If the properties are transferred to a different company then duty would be payable as well as CGT. If the trustee is changing then there may be no or little stamp duty and no CGT. But mortgages will need to be discharged and new loans applied for as legal ownership is changing.
One of the limitations of trusts to own IPs and the present lender requirements is that a equity release for a trust would only allow the trustee company to use those borrowed funds if the legal owner is also the same company. The problem with this is the trust continually accumulates and then has a land tax issue - which sometimes was why a trust was considered. Lenders wont generally allow Trust A to own property and do a equity release so that Trust B can buy. Changes to the trustee company may result in stamp duty if a change to the trust control occurs. Even small changes should be avoided without legal advice eg : In QLD adding a additional beneficiary / appointor etc can be a issue.
banks will not do a equity release to trust A if it is going to loan the funds to trust B for a property purchase? that seems unfair is this for all lenders?
Lenders don't like lending you money where that money will be used by someone else. Same with trusts.But it can be done.
i would have thought it wouldn't matter as you're still giving a personal guarantee? is it a case of only a few lenders allow it?
It matters. Just try and borrow $100,000 in your name and telling the bank your cousin is going to use the money. These are basically treated as cash out loans. If you spend the cash the bank will have a hard time getting it back. If you use the money yourself to purchase an asset they have a much better chance of getting it back - you have a contract with them.
Some borrowers who are excellent risks with high servicing capacity and their balls in the banks bottom drawer can sometimes get a loan "to any controlled entity" but they tend to be high net wealths where the bank holds loads of security eg home, business, guarantees etc. Often seen with private banking / commercial lender. But its rare for a trust to be permitted this type of finance as Directors may breach fiduciary duties and the bank could be sued. Bank wont get involved and will just say no. Their legal compliance is fairly tight these days. About as easy to get through as a older aged parent as guarantor.
