Hi Folks,
Our home is worth $330,000 and we owe $135,000 on it.
We have 1 IP worth $165,000 and owe $53,000 on it (interest only loan).
We purchased the IP off my mother in law for the reduced amount; essentially we paid out her debt and gave her free rent in the property (she was paying more than half her pension to the bank, a loan she would never pay off).
Foolishly I did not realise that I would have to declare receipt of full market value rent to make claims and deductions on the property as an investment.
So my mother in law gets free rent and I declare rental income I do not actually get - weird stuff.
Now, I saw my accountant and asked him what I could do. He suggested that I could borrow more money on the IP to the value of the property, based on the stamp duty I paid on the market value at purchase.
It went like this - borrow $80,000 and give it to my mother in law and she holds it for a period. If queried by the ATO later, we say that we are just paying the remainder of owed money to my mother in law.
At a later date she gifts us the $80,000 and we reduce our mortgage and refinance the lower amount.
This all sounds pretty underhand and shady to me, I can imagine trying to explain it all in an audit.
We are currently purchasing another two rental properties, both positive cash flow and properly setup (I hope).
Anyone have any ideas about shifting debt in my situation - and is it legal.
Also, how would I tell the bank that "I need an $80,000 loan to reduce my mortgage, but I'll just rest the money in my mother in laws account for a while first".
Hope this is not too rambling, cheers,
Shaun.
Our home is worth $330,000 and we owe $135,000 on it.
We have 1 IP worth $165,000 and owe $53,000 on it (interest only loan).
We purchased the IP off my mother in law for the reduced amount; essentially we paid out her debt and gave her free rent in the property (she was paying more than half her pension to the bank, a loan she would never pay off).
Foolishly I did not realise that I would have to declare receipt of full market value rent to make claims and deductions on the property as an investment.
So my mother in law gets free rent and I declare rental income I do not actually get - weird stuff.
Now, I saw my accountant and asked him what I could do. He suggested that I could borrow more money on the IP to the value of the property, based on the stamp duty I paid on the market value at purchase.
It went like this - borrow $80,000 and give it to my mother in law and she holds it for a period. If queried by the ATO later, we say that we are just paying the remainder of owed money to my mother in law.
At a later date she gifts us the $80,000 and we reduce our mortgage and refinance the lower amount.
This all sounds pretty underhand and shady to me, I can imagine trying to explain it all in an audit.
We are currently purchasing another two rental properties, both positive cash flow and properly setup (I hope).
Anyone have any ideas about shifting debt in my situation - and is it legal.
Also, how would I tell the bank that "I need an $80,000 loan to reduce my mortgage, but I'll just rest the money in my mother in laws account for a while first".
Hope this is not too rambling, cheers,
Shaun.