Buying an IP with a Unit Trust and Settlement issue

[psych0tikx]

Hi I am a first time poster. I have really enjoyed reading the posts in this forum. I apologise if my question has already been answered, but I was unable to find the answer.

So I have purchased an investment property in Perth. It is off the plan and settlement is due in November.

The structure is as follows: Company as trustee of Unit Trust purchases property
(a) I in my personal name receive funds from bank
(b) I buy units in Unit Trust with funds from bank
(c) Unit Trust then purchases IP
(d) Bank is taking security over the IP

After reading this forum this seems like a common way of purchasing an IP.

Issue I have is with settlement. The Bank won't settle and release funds to me until the property settles. The purchase can't settle until the Unit Trust pays the seller. The Unit Trust can't get the funds until I purchase Units. I can't purchase units until the Bank releases the funds. A very circular process.

However, what I want is for the funds to go from the bank to my loan account in my personal name and then immediately transferred to my unit trust bank account and then immediately transferred to the seller.

My broker isn't sure how to deal with it. My settlement agent is not sure either. I cannot speak directly with the bank's relationship manager. My accountant recognises the problem and may be able to do appropriate documentation to rectify the situation.

I didn't think this was a complex issue, but I would like to know how the transaction will happen practically.

If the Bank can't assist, my only thought is that the funds are paid directly from the bank to the Seller. I will then have to have a declaration of trust or some other document which shows that the money being paid to the Seller is actually being paid by me personally on behalf of the Unit Trust and in consideration of the purchase of Units in the Unit Trust. All this will obviously have to happen simultaneously.

Am I missing the point here, does anyone have any comment as to how the matter should be dealt with practically and whether my proposed solution will work.

Thanks for your help in advance.

Russell

 

[Terry_w]

The whole process will operate simultaneously.

The bank won't give you the money because they will not have security until they receieve security and the vendor won't transfer until they get the money.

 

[psych0tikx]

Thanks Terry

I understand that process but for tax purposes I need the bank accounts to show the funds being loaned to me being paid the unit trust and then transferred from the Trust to the seller.

Will these entries be automatic? What about the resolutions to issue units in the Trust I presume the resolutions will refer to the round Robin effect of transfers. Do you or anyone have a draft resolution that can assist?

Thanks for your help.

Russell

 

[Terry_w]

Thanks Terry

I understand that process but for tax purposes I need the bank accounts to show the funds being loaned to me being paid the unit trust and then transferred from the Trust to the seller.

Will these entries be automatic? What about the resolutions to issue units in the Trust I presume the resolutions will refer to the round Robin effect of transfers. Do you or anyone have a draft resolution that can assist?

Thanks for your help.

Russell

Sounds like you need to get some serious tax advice, and quick.

 

[psych0tikx]

Yeh my Accountant has already said they can deal with it but would prefer that the bank accounts actually show the transactions occurring. I am speaking with the bank to see what they propose.

If no one else has any other ideas perhaps I could draft a declaration of trust to show that the funds that are loaned to me and paid to the seller on settlement are treated as being held on trust in consideration for the issuing of units in the unit trust.

Would there be any tax implications with this?

Thanks for your help.

 

[psych0tikx]

This link appears to also have covered the issue: http://somersoft.com/forums/archive/index.php/t-6479.html