Structure around main use

Question from Vanda updated on 11th October 2019:

My husband and I bought our first investment property and set up an LTC about two years ago. We are in process of buying another investment property. But it’s really lovely so we are considering actually living in it and selling our family home to buy another investment. (Our current family home would not be a good rental.)

My question is - should we purchase as the LTC or in our personal names? How easy is it to switch from one to the other once we decide?

Our expert Mark Withers responded:


My view would be to plan the structuring around the predominant use of the property. If it will be your home, plan accordingly. If you need to alter ownership it is costly with lawyers and re-documentations of bank lending.

Further, it also triggers the bright line test as transfers between associated parties are captured without exemption. That means that any gain derived during the period of ownership in the LTC would be taxable when the company sells the property to you. I'd suggest leaving the lending on the new home floating so this debt can be repaid out of the proceeds of the sale of the family home when that occurs.

Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.

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