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Hello & Help? Multifacetted advice needed . . .

Discussion in 'General Investing Discussion' started by Pagent, 1st Mar, 2012.

  1. Pagent

    Pagent New Member

    Joined:
    29th Feb, 2012
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    Location:
    Sydney, NSW
    I am a newbie in the investment world. As a multi-media creative my sklills used in this arena would invariably land me in trouble I think. Hence the request for some advice / feedback / help.

    The set-up: I am the sole beneficiary of my late father's estate, principally a house with a reverse mortgage on it, which, as Power of Attorney (he was incapacitated at the time) I extended to cover High-Dependancy care fees.

    He passed away late last year and in winding-up the estate I am faced with the very real need to dispose of the property to finalise the outstanding mortgage. There is positive equity in the property of around 60% x $900k.

    Because of the nature of my business I am probably not going to get a mortgage on it in my own right due to the irregular nature of my income & I have never had a mortgage previously.

    What I would like to do is sell the property to my Holding company (which owns all the assets of my business (AV equip, vehicles, trailers, boats etc) which I lent the cash to (as a Directors loan) to purchase said assets.

    In selling to the company I would pay out the reverse mortgage & re-mortgage it in the company name & lease the property from the company.

    Is this a realistic or possible outcome? If not, are there any other more widely used options that would get me close to what I am aiming to achieve?

    It is a "different" series of questions, but after reading many of the threads here I am sure some of the regular contributors would probably be able to throw their 2 bob's worth into the ring.

    Thanks in advance for whatever light you guys may be able to shed on my dilemma.

    Cheers - A
     
  2. Terryw

    Terryw Well-Known Member

    Joined:
    9th Jun, 2006
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    653
    Location:
    Sydney
    Hi

    I can see some issues:
    1. If you cannot qualify for a loan in your own name then your company won't be able to either.

    2. Asset protection - if a tenant sued the company all the company assets would be exposed.

    May I ask if you have children under 18?

    What state are you in?
     
  3. Terryw

    Terryw Well-Known Member

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    Sorry, I just seen you are in Sydney.

    Do you intend to occupy the property as your main residence?

    If you have it in a company then it will be up for land tax and CGT. Stamp duty on the transfer too.
     
  4. Pagent

    Pagent New Member

    Joined:
    29th Feb, 2012
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    Location:
    Sydney, NSW
    Terry,

    thanks for quick response - I have 2 children under 18 & at this stage I need to occupy the property as my main residence, though if I could levergae enough out of the equity I'd like to get into another property.

    I think I can see what you are angling at (family trust)?

    I don't know that I can't get a mortgage in my name, just that many friends have tut tutted & rolled their eyes (never really cared too much for money & they see that as sacriledge - I just see it as relief!). The company already has assets of over $100k which it leases back to the operating company, otherwise it does not trade.

    cheers

    A
     
  5. Terryw

    Terryw Well-Known Member

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    Location:
    Sydney
    I was thinking more along the lines of a post death testamentary trust. There are huge tax advantages for children under testatementary trusts.

    However, if there was not a trust set up under the will or no option for a trust then it may not be possible to set it up now so as the grandchildren of the deceased are able to benefit. It all comes down to the terms of the will.

    If there is no option for a trust under the will then assets of the deceased can be transferred to a trust within 3 years of death. The property must have been inherited from the deceased. The executor could even possibly sell estate assets and then the proceeds could go into the trust. However, this will only benefit children of the deceased. Any children could then receive income from the trust and be taxed at adult rates - this effectively means each child can earn approx $16k pa tax free.
     
  6. Terryw

    Terryw Well-Known Member

    Joined:
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    Location:
    Sydney
    Also for the company, even though it may not be trading now there is a risk if it holds other assets and holds a rental property - though you are unlikely to sue your own company you may rent it out in the future.

    Also it is not a good idea to buy assets in a company because it does not receive the 50% CGT discount.

    The company owning $100k in assets won't help a loan application at all either.

    (btw, it would have been better to have a trust own these assets and then lease them to the trading company = asset protection and tax flexibility)

    in the end it all comes down to your borrowing capacity whether you wish to hold the property in your own name or company or trustee. This will depend on your income and your company's income so it is probably best to go and see a broker to work out if getting that loan would be possible. Otherwise the executor may have to sell it. If the current loan repayments are being met then the lender will probably not be in a hurry, if not then they may start to get worried sooner rather than later.