Trap 3 – Tainting for Life
Friends, Jesse and Skylar, are 50% shareholders in a property development company called...
This blog is Part 1 of 2 on traps that arise when land transactions involve “associated persons”. By way of background, both the Income Tax Act and the Goods and Services Tax Act have definitions of associated persons and special rules that apply to transactions between associates.
Property dealers, developers and investors are often party to transactions with associated persons (e.g. restructuring ownership of existing property).
As mortgage advisers we often see clients in situations where they have gotten themselves into debt and aren’t always managing things in the most effective ways, and this includes first-home buyers and also property investors.
The most common mortgage mistakes we see are as follows:
Financing renovations by topping up on your home loan can be the easiest and cheapest way to get the job done if you don’t have access to the cash. ‘Topping up’ means increasing your existing lending with your existing bank. In some cases, if it makes more sense economically speaking, it could even be worthwhile refinancing (moving to another bank) for a better deal on your existing mortgage AND the new funds being requested......
But first, in case you missed my last blog, the main points from the draft ring-fencing of losses bill are.....
On 5 December 2018, the Government released the first draft of legislation dealing with the proposed ring-fencing of tax losses from rental properties. First impression on reading the Bill is that it is extraordinarily complicated and leaves questions unanswered. Here is a quick summary of the key points........
There is a reasonable chance you have already heard about the phenomenal rates being offered almost across the board now with most banks having rate specials down into the 3%'s.
What you may not be aware of is that you don’t necessarily need to wait until your current fixed rates expire in order to take advantage of these very low rates.
As a personal example yesterday I broke out of a 5-year rate that I had locked down circa 2 years ago for 4.65%. I incurred no break fee in doing so. I then re-fixed at a interest rate of......
- The Tax Working Group (TWG) has ruled out a land tax or an inheritance tax, but appears to me to clearly be pushing towards implementation of CGT. They have noted that it is premature to form a view without firstly determining exactly how the tax may apply, but I would be highly surprised if their final report did not support implementation of CGT.
- The TWG is of the view that CGT should apply across assets broadly, so not restricted solely to real estate. It would also apply to shares, intellectual property, goodwill, business assets etc. The one exception to this will be the family home.
Can you borrow money to renovate?
The short answer – is yes. There are two key ways of borrowing for renovations (large, or small).
A bridging loan is a loan to assist you in purchasing a new property before you’ve unconditionally sold your existing property. This loan remains in place until the existing/old home is sold, and then you are left with the difference as your new mortgage. This can be either when upsizing, or downsizing.