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How to structure this IP purchase?

Discussion in 'Accounting, Tax & Legal' started by artgul, 22nd Sep, 2006.

  1. artgul

    artgul Well-Known Member

    Joined:
    16th Aug, 2005
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    77
    Location:
    Sydney
    Was wondering how I can strucutre the following deal:

    Want to buy a property under my 18 y old daughters name so, I can save on stamp duty (NSW <= $500k) as well as taking advantage of the government 1rst home buyers grant. My daughter is a student and doesn't work. The question is how I can structure this deal in a way that:

    1/ I can control the property.
    2/ The Bank will lend the funds with a 10% LVR.

    Regards,
    artgul
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Do you really want a 10% LVR ? Don't you mean 90% LVR (loan-to-value ratio) ?
     
  3. artgul

    artgul Well-Known Member

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    Yeah well... you know what I meant :D
     
  4. Nigel Ward

    Nigel Ward Team InvestEd

    Joined:
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    It assume it will be your daughter's PPOR?

    Perhaps the Bank will let her borrow if you guarantee the loan? I suspect the 90% LVR will be a problem with this approach, but talk to your bank and/or a good mortgage broker to find out if this will fly. There are lenders out there I think that will look at low/no deposit borrowers. With "savings" ;) of 10% plus the FHOG your daughter may qualify. BUT, I suspect that servicability (aka lack of a job :eek: ) will be the problem.

    Bear in mind the guarantee will affect your borrowing capacity. :(

    Alternatively, perhaps you could:

    1) borrow against equity in other properties you own
    2) lend her that money on commercial arms length terms
    3) she either buys property outright or with a much bigger depost and hence much smaller loan in her own name (and hopefully servicability is less of a concern to the bank)
    4) you take 2nd mortgage over the property
    5) priority deed with her bank (if required) to regulate 1st and 2nd mortgage enforcement proceeds priority

    Take some tax advice but your interest on your loan may be deductible. Of course on the flipside interest paid by your daughter to you will be income...BUT (again take some good tax advice) perhaps the interest could be deferred or nominal for the first couple of years or it could even be a bullet payment with interest capitalised

    Just let me say once more though...get some tax advice. NickM here is "da man" on these sorts of more structured approaches.

    Hope that gives you some food for thought. You may decide it's all just too hard for relatively minimal benefit... Couldn't you just buy the property, let your daughter rent it at market rental and let her benefit either as beneficiary of the trust owing the asset or (ultimately) under your will... :rolleyes:

    Cheers
    N.
     
  5. NickM

    NickM Co-founder Staff Member

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    In order to control the property you will need to either own the property or take a 2nd mortgage.

    if your daughter buys and accesses the FHOG then she must reside there for 6 mths minimum.

    she can then rent it out but she will claim the deductions.

    It may be worthwhile calling the OSR and asking if you can also be on title. I am not sure of the specific FHOG requirements.

    First Home Owners

    You could use a trust but you will not qualify for the FHOG.

    Good luck
    NickM
     
  6. Barracuda

    Barracuda Active Member

    Joined:
    2nd Jun, 2006
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    Location:
    Wahroonga, NSW

    My question is - are you doing this for her benefit, or yours? There doesn't seem to be any mention of the benefit to your daughter in your reasoning (so "I" can save on stamp duty and take advantage of FHG). Is it ethical to use your daughter's benefits in this way?

    I could have read your intentions wrong, in which case, I apologise.

    Cheers,