Hi Rob and All
Thanks for your contrary view, please substantiate ASAP,
Regards
Anthony

Hi All
This is a good place to see how others think and highlights how we are all different in how we think.
I have a couple of useful thoughts as follows:
It's generally held by these forums that debt is good AND bad.
Good is deductible interest, bad is non-deductible interest.
But in my view any expense is still a cost – "good" debt may cost a bit less but it still costs.
Capital outlays as in debt reduction are almost always after tax.
The only time you can generally reduce capital debt at a lower tax rate now is with a deductible sum such as super. contribution but it is a reduced tax cost not nil, and this strategy is complex for most people to achieve, or
if you pay off capital debt with a capital gain where the tax cost is reduced to a lower rate than usual..
So my belief is that – paying down debt is all good, it reduces stress, financial and personal.
It allows redraw in many IO and LOC loans. You can always pay down the loan to say $5,000 – $10,000 so you can extinguish it from your cash at bank or even from a CCard and you can re-finance without setup costs. So its always a safer position if your cash flows change.
Regards to All

Hi Luke, Terry and All
Yes
This is one of the strategies we use in our TEBL Trust arrangement.
Also please note that some people have been referring to "distributiing" or "transfer" of losses – it's not legal and its a breach of tax regulations.
In all cases – persons, companies and trusts, losses (revenue or capital) can only be used by the entity which generated them. There are also rules and test about continuity of ownership of the entity and continuity of the activity which generated the losses.
However you can distribute from one – trust1 to another trust2 if the recipient trust2 via its trustee is a beneficiary, or transfer if there is an obligation to repay a debt in which case it is not a distribution but a capital payment and will not reduce the income of trust 1. A business entity can also charge a management fee from one to another – bvut treat this with care as it must be able to be substantiated as to value and will also incur GST when it is invoiced.

Interesting stuff playing with business trusts

Hello Gips & All
The gross return on your own business should exceed 25%,  + some Capital Gain, the return on property at best will gross say 5% – 7%  with little personal exertion if you engage an agent. Just work out your hourly rate of return from both and assess the opportunity cost and risk. Do you feel that you can expand the business by promotion or extra hours work or staying open ? Remember fixed costs such as rent do not usually limit your opening hours. Buying any property involves commitment and serious up front expences and is usually a 5-7 year investment, taking on debt and using at least some of you time.
Compare your business which can be changed without reference to many external factors, in my view you should make a careful fully researched and informed evaluation before taking any investment decision. The more care you spend planning the more likely you will be successful in the venture.

Regards to All
The secret of success is in the planning.

Hi poweregg and All,

I have been working in this area for over15 years doing planning for investors, mostly business owners,

Q1. You can move out of your PPOR for up to 6 years without losing the CGT exemption, and provided you move back in for a while – say six months you can repeat that process without detriment,
In you current situation – rent free parental accomodation, you cannot claim any expenses as the "investment" has not beeen made to produce assessable income.

Q2
Is a bit more complex.
First – if the loan is repaid then you have no interest expenses – but you still have all the other items: maintenance & repairs, depreciation, or you may borrow to add a room or extend etc. but it is still an investment property. However the golden rule is still what is the purpose of the expense: IE is it  "an expense NECESSARILY INCURRED by the taxpayer,TO PRODUCE ASSESSABLE INCOME, if the answer is NO then no deductions will apply.
While you are all mulling over this very interesting idea go and read the case:Janmor Nominees Pty Ltd 87 ATC 4813.
This involved a SERVICE TRUST and was a case the ATO lost.
The other more iteresting case involves the ATO Ruling  ID 2002/388. This is an ATO Interpretive Determination issued in 2002, and says this: A SMSF can hold an investment interest in a unit trust which owns an investment property and the trustee of the unit trust can lease that property to member/s of the SMSF and provided they pay a full, arms length commercial rent to the trustee then all expenses are fully deductible. This is supported by the 1991 appeal case Forli Pty Ltd V ATO which the ATO also lost after declaring the relationship as a breach of super. laws.

However before you all get too excited understand that the SMSF and Unit Trust must have been linked < Aug 12 1999 so its now history. Also read the ATO "Agreessive Tax Planning Alert list which includes "Home Loan Unit Trust Arrangement" as the ATO has identified this as a NO GO area. The ATO Alert is not law – but unless you have the resources to fight a case it may bring you much anguish.

However given the great benefits involved it may be worth considering. Because Q? Does it mean that to because you get all the deductions – will you lose the PPOR benefits ? – No not necessarily because under the CGT PPOR exemptions it is not necessary to own a FREEHOLD interest in the property – it can arise from a LEASEHOLD entitlement.

Detailed personal property planning – before you buy can bring much greater benefit and certainty than just listeneing to "property gurus".

All contributions to debate in this area are invited.
Regards to All

Anthony @ A4Companies

Hi Babee & All
This needs some care,
Except for possible subdivision its probly better for you to lend to your parents under a written agreement which gives you the right to register a caveat over the property as there are some variables.
Suppose selling the investments timing doesnt fit in 2 years,  or  their plans change thro illness or whatever, then you are stuck  ?
or the subdivision is not approved ?
however if you lend to them under the agreement then that could include involvement in the subdivision at the time it gets approved.
Either way under the agreement you can share in the equity,
Sounds like a job for a solicitor to me.

Anthony @ A4Companies

Hi Josh
I have been working on a project for people in your position for almost 3 years and have done heaps of research during that time.
My results tell me this:
1. Buying an investment property before a home is paramount, Why ?
Simply because the Govt. support is much larger by a country mile and that support is for all years you own the property not just a first year benefit. These subsidies usually allow you to finance the deal for less than $100 per week.
2. It also tells me that to buy a $500K property you need to use a structured approach via a special fixed trust, Add formal family loans and pay those off before the main loan (IO finance).
3. This leaves you with a hard track to run on for about 2 -3 years and after that you can ease off.
4.One of the best ways to own a home is to buy an IP first and use the equity growth by re-finanancing the trust to give you back capital to use for a home deposit.
Then the rental income flow subsidises your loan interest in the trust.
5. Because the IP is not in your name you can later arrange for your super. fund to ultimatel own the property.
There are many variations possible – this is the basics.
My next ittem will be about :- "The First Nine Years" (of your home or IP  mortgage).
Watch this space.
Regards to all would-be IP and home owners.
Anthony K

Hi Wattp,
I see you already had some feedback, just one small thing – if you have a SMSF (if not you could get one),. then you could get the fund to buy out the other 2 partners and you can keep your friends. I would rather have 2 friends than a bill and a lawyer ).
Or you could get the SMSF to take over all of it, in both cases you could have the SMSF borrow some cash, either way you have legals and stamp duties to pay.
Regards
AK