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Best structure - Hybrid or own names for a new IP / possible future PPOR

Discussion in 'Accounting, Tax & Legal' started by perky, 9th Nov, 2008.

  1. perky

    perky Well-Known Member

    Joined:
    15th Aug, 2005
    Posts:
    300
    Location:
    Sydney
    Hi guys,
    I have a scenario I want to throw out there.

    We have found a great block of land at a new development that is (hopefully) going to have good capital growth over the next several years.

    The plan - to live there in 4 to 6 years.

    The question - should we do it under the Hybrid trust or do it under normal two names?

    The deal -
    Block at 359k.
    It's one of the two car park blocks next to the display homes - 650sqm and probable glimpses of the new golf course over and next to the first display home on the corner.
    As such - it will be leased back at 8% rent from the developer for min 2 years plus an extra 4 x 6 month leases (so likely 3 years lease) - when you know that currently Westpac is 7.01% then that is a positive cashflow prospect (not to mention further int rates cuts coming).

    If you knew if would be probably 4 years until a house was built , but its an 80% chance you would live there (may be tenanted for 1 or 2 years at most) , would you do it under the Hybrid trust or own names?

    Pros under Hybrid Trust -
    Protection.
    If sold at capital gain (if we decide not to live there after all) , then less cap gains tax.

    Cons - Land tax!!
    Living in own house under Hybrid trust may not be "arms length" ?
     
  2. Rob G.

    Rob G. Well-Known Member

    Joined:
    6th Jun, 2007
    Posts:
    717
    Location:
    Melbourne, VIC
    What's so special about a HDT if your investment is cashflow positive - are you unrelated joint investors ?

    Why is there less capital gains tax using a HDT - usually there is the same or more, but maybe avoids stamp duty on any transfer to discretionary form ?

    Your post is a bit confusing, maybe you could explain a bit more.

    Cheers,

    Rob
     
  3. perky

    perky Well-Known Member

    Joined:
    15th Aug, 2005
    Posts:
    300
    Location:
    Sydney
    Hi Rob,
    I spoke with Nick, seeing as though this will likely be our PPOR in around 5 years we have decided to make it 99/1 in my name/wifes name.
    Now to make sure the contract is sound....thats with my lawyer.