Follow along with the video below to see how to install our site as a web app on your home screen.
Note: This feature may not be available in some browsers.
My accountant and financial advisor both assure me that this is a perfectly legal strategy as long as market rate rent is being charged - do u disagree?
Its not an arms length transaction. You give you mother rent money and she pays it back to you. Your own money is paying the mortgage which reduces or negates the investment property status.
If she was paying her own rent from her own funds/income/pension and it was market rent that is another story.
I am giving my mum an allowance and she is choosing to spend part if that allowance on rent in a property that suits her best and the rent us at market rates
I've heard of the Tax Office deeming free rent as income. If your mum has no income, though, this may well fall under the tax free threshold.
You say your Mum has no money, in that case why doesn't she apply for the pension
If she gets a pension then she can get a rent allowance and would pay you rent officially which would cover the ATO
Maybe you then employ her as a house keeper to earn just enough to stay under the pension limits. She can "eat at your place" and pay you rent.
I think it would be a much safer way of setting it up just in case the ATO arrives.
I am sure you see it that way, but the ATO likely wont, should an audit happen.
EDIT: I just asked an accountant I know, he made a scrunched up face and said its iffy and would depend on how the money is gifted to your mother. If done in the wrong way it will land you and her in hot water.
Dont want to sound pessimistic but this sounds like the ATO would view it as a tax avoidance scheme and under Part IVA, the ATO could knock back your claims. My opinion only.
it isnt free rent.
re the issue at hand, as youve alluded to there is certainly a level where buying it would be worth the risk. where that level is is hard to say as we do not know the ins and outs of the property and the rust etc.
i will say though that in this case since the owner is not really willing to drop his price you arent gaining much or buying under market value at all so in this case even if he agrees to hold say $30k in trust account it wouldnt be worth the risk. i assume this would be held in trust for a fixed period but this fight with the builder could drag on for quite a while.
best of luck by the way and pls dont be afraid to ask more questions. at the heart of the matter you're trying to do something pretty cool so im sure at least some (or most imo) of us would like you to avoid any pitfalls you can
is there nowhere else close by where you can find a place appropriate for your mum for similar money?
i guess the question you have to ask yourself is, "is this property worth the headache"?
one of the things i am trying to determine is how much headache would this actually bring me?
update
the vendor is an elderly lady and is apparently very spooked/disturbed about the whole strata issue and has reduced her asking price to $650k negotiable
other owners in the complex and people in other strata complexes with large repair issues have told me that when older people in strata complexes cannot pay special levies for big repair bills it has not been a big problem because the strata can simply get a strata finance loan (SFL) (upto $25k per unit) to fund the repairs
- apparently this increases the strata levies by only a modest very manageable amount so that special levies are not needed and pushed the costs onto the next owners rather than current owner but have the downside of driving the property price down (by the value of the SFL per unit) until the SFL is repaid (although if i buy i would not be looking to sell in the short/medium term so this does not seem a big downside for me)
- reading on strata forums there seem to be many people in strata complexes with numerous problems who have been greatly helped by SFL's to the extent that it sounds like they are an excellent solution
- does anyone have any experiences with SFL's and info about how common these are and how applicable to this situation?