melb property market..is it true ?, page-8

re: don't worry, just keep borrowing Let's inject some realism here, as talkback radio has already been swamped with this, today.

There is inherent uncertainty as to whether a "minor" can buy real estate (in most States - doubtful). According to talkback radio this morning, one property lawyer has said that, in Victoria, a "minor" can buy, but cannot sell without Supreme Court approval. Another property lawyer has said that "minors" cannot buy, as they lack "full" legal capacity.

This accords with my own views (and training) where "minors" cannot contract except through their guardian /trustee. Exceptions concern contracts for necessaries (ie: necessities of life - of which housing does not qualify) and beneficial contracts of service (ie: employment).

So, how can a "minor" buy propery?

Answer:
Through the actions and conduct of their parents (ie: in name, only), their guardians, and /or through the establishment of some type of trust arrangement.

In all of these circumstances, however, the genuine nature of the Grant is such that erroneous completion of the applications was, in all likelihood, required. In other words, prsopective fraud.

But, in any event, any "minor" owner of property in these circumstances would:
1)
be denied full negative gearing (ie: the parents, guardian, trustee would only ever be able to offset the loan costs /property costs against rental income, rather than against incoxme from all sources);
2)
if positively geared, will be taxed at higher rates (ie: the special children's rates of tax would apply);
3)
lose the CGT exemption, meaning that the property bought would always attract CGT (ie: when sold for >base price);
4)
if borrowed for, the corresponding security would be against the other properties (ie: the parental home, etc) meaning that the overall borrowing capacity of the family unit would be further restircted; and
5)
broadly speaking would be inefficient (ie: on a tax efficiency basis).