Tax Saving Options

Discussion in 'Accounting & Tax' started by Crocodilecracking, 14th Mar, 2022.

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  1. Crocodilecracking

    Crocodilecracking Member

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    Hi All,

    Long time lurker and finally a member. Please to meet everyone's acquaintance.

    I am looking for potential methods to save tax given my situation and am looking for advice.

    I am based in Melbourne but will be inheriting 2 IP in WA where I will be renting them out and my wife and I are also looking to get a mortgage to purchase our PPOR in Melbourne this year. The place we will be buying will become another IP once we decide to have kids and will look for a larger PPOR.

    I understand that in most cases it would be more advantageous to own a PPOR outright and to take loans for IPs due to tax deductions.

    Any ideas as to how we could potentially utilise the 2 IPs to essentially pay for our PPOR so we can save on tax?

    Many thanks
     
  2. Terry_w

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

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    Get some advice on selling the IPs and reborrowing to buy 2 more after buying your main residence. Generally thought the transaction costs will way exceed any tax savings, but this could be less of an issue as prices rise. Don't forget to factor in any potential CGT on the sale.

    See these tips which may help
    Strategy: 11 Strategies for when you move out of the PPOR and keep it Strategy: 11 Strategies for when you move out of the PPOR and keep it
     
  3. Crocodilecracking

    Crocodilecracking Member

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    Thanks for the response, Terry.

    These 2 properties in WA are strategically located and I prefer not to sell them if possible. They are due for settlement in a couple of months.

    What are your thoughts on creating trust and putting all 3 properties (2 WA IP and Vic PPOR) into it and using the company trustee to take a loan on the PPOR? I understand that there could be significant stamp duty costs involved, land tax costs, carry-forward benefit lost etc. But in my case, given that IPs will also result in extra cash, is it possible to structure it in a trust such that I would only pay tax on any extra earnings after paying against the mortgage?

    Greatly appreciate your help on this matter.

    Thanks
     
  4. Terry_w

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

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    It would be too costly I imagine. Whats the CGT on that? Stamp duty etc prob 5% of the value. You would have to make sure the trustee borrows the full amount. The properties could be negative geared also so a loss trapped in the trust.
     
  5. Crocodilecracking

    Crocodilecracking Member

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    Hi Terry,

    All 3 properties are yet to be settled so if I'm not mistaken stamp duty will have to be paid for the IPs regardless if its held in personal name or in a trust and will be no CGTs if moved into the trust.

    Am I able to engage you for your comprehensive advice on this issue?

    Thanks
     
  6. Terry_w

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

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    If you are inheriting property pursuant to a will there would be no stamp duty on the transfer to you. But if it not as per the will, or via trustees powers, then it would trigger stamp duty for you and CGT for the estate.

    I am not taking on any law clients at the moment and you would probably be better with a WA based lawyer in any case. I can recommend WA lawyers Birchstone Tax Law – Western Australia’s leading tax law firm
     
  7. Crocodilecracking

    Crocodilecracking Member

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    Thanks for the contact Terry, will give them a call.

    Nah, not through a will or trustee powers. Apologies for not being clear. I'm gifted the properties that are still in the midst of construction. Hence I was thinking of the possibility of putting them into a trust during settlement.
     
  8. Terry_w

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

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    well if you haven't been gifted them you could buy them at full market value and borrow to do so and then receive a gift of cash instead and use the cash to buy your main residence - ideally borrowing to do so and the loan shuffling to get a lower rate on the investment loans.
     
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