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My daughter found a town house and was in no position to get…

My daughter found a town...

My daughter found a town house and was in no position to get a bank loan, so my husband and I took out a loan buying the place on her behalf. She did pay the deposit. As she was living in the place with her two sons she paid rent to us which we returned as rental income (negative gearing). She was still in no position to cover all outgoings. We had paid all outgoings up until last year. Last year she did a bare trust and asked us to transfer the property into her and a partners name which we did. Therefore no stamp duty was payable on the transfer. She took out a loan herself and paid out our loan which was 100% of original purchase price.
Our accountant said we shouldn't have returned the income on our returns if there was a Trust and will have to redo our returns back to 2005.
Can we undo the bare trust? I realise our daughter will need to advise the SRO regarding stamp duty.

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Answered in 7 minutes by:

3/18/2010

Solicitor: Leon, Solicitor replied 13 years ago

Leon, Solicitor

Category: Australia Law

Satisfied Customers: 52,712

Experience: BEc Dip Ed, Dip Law (SAB) MTax (UNSW)

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HI

You cant undo a bare trust as it would be seen as fraud and you and your daughter can be charged and prosecuted.

You have signed documents with the Office of State Revenue in order that your daughter not pay the stamp duty.

The only alternative I can think of is that you treat the transfer to your mother as a sale and pay capital gains to the ATO for the profit that you would have made.

You have to have the property valued and the market value will be the deemed price you received.

I hope this is of assistance and if so please click on the accept button

Customer reply replied 13 years ago

Shouldn't the trust have been set up prior to purchase of property?

Solicitor: Leon, Solicitor replied 13 years ago

HI

Generally yes. But you can hold property in trust for someone else even if there is no trust deed.

The information you provided the OSR was enough to convince then that you did hold the property in trust.

If you wish to go back and advise that it was a mistake you should speak to your accountant and get details of what the possible penalties are for providing false information to the government.

I hope this is of assistance and if so please click on the accept button

Leon, Solicitor

Category: Australia Law

Satisfied Customers: 52,712

Experience: BEc Dip Ed, Dip Law (SAB) MTax (UNSW)

Verified

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