weighing up structures

Hi team,

My whole family (brother, parents and grandparents) have been talking through investment strategies and are looking to purchase several properties soon if we can find what we're looking for, but Im struggling with all the options for structuring.

My brother and i both have cash (c $100k each) to invest, and i have good servicing with my salary, but my parents and grandparents have huge amounts of equity they're wanting to chip in and reasonable income for servicing. Their income comes from distributions from a family pty ltd company and the accountant manages distributions between shareholders for maximum tax benefit.

We're looking at long term buy and hold sites with future medium density development potential. Probably places that can benefit from a little reno in the short term to hopefully make them cashflow neutral or positive and then just land bank and start developing in 5-10 years

Im thinking with the potential risk of development it might be smart to purchase in a trust from the start, but they'll be negatively geared in the short term and it'd be a shame to lose the tax benefits.
The family company could purchase them, but no cgt discounts in that case.

We could buy properties in one or more individuals names, but my brother and i are also concerned that either of us could divorce in future and we want to protect these assets. Theres also the risk that my brother and i could end up having our own disputes in future so if ownership isnt equitable it could disadvantage one of us.

The benefit of doing it in individual names is that tax savings. I have payg income that could absorb some property losses, and my brother doesn't have a ppor yet so if one was owned in his name and lived in it while renovating we could get a full cgt exemption on it with the 6 year rule. He doesn't have enough income to service the whole thing on his own, but we could do a related party loan to make up the difference.

The option i'm currently trying to think through is buying in the names of my grandparents. Their accountant can manage the distributions from the family company to give them enough income for servicing, and then when they pass away the assets will flow into their testamentary trusts, which might coincide with when we are ready to start developing.
would it be difficult to take out loans for people in their 80's? Would it make it much more complicated to leave the asset to a test trust if it is mortgaged?

Any suggestions welcome

 

personal advice will be your best strategy. you cant legally buy in names of grandparents. they can buy. centrelink, aged care, deceased taxes, loss, duty and family law will be involved in three generations.

tax advice too... the cgt exemption is lost when profit making intentions appear. or its scheme. using the word development means you need to think in the world of gst, not cgt.

if one family member gets sued or divorced what could happen ? who is the trust controller ?

personal tax advice is what is needed.

 

Couple of points
Trusts generally provide no protection against divorce.
People in 80s can borrow but it will be more difficult
Never buy in a company which has other assets or conducts business
A loan needs to be paid out at death so it will be the same if it passes to a trust or an individual at death. Someone else can borrow to pay out the bank though.

The testamentary trust approach is seriously worth considering, but there are heaps of issues to consider and your grandparents need good legal advice on this.