Thanks Terry

That is a good thing then if the principal part of the loan repayments is not considered a deduction/loss which will offset the rental income – otherwise I will go from neutral/positive geared within the trust to negative!

If this is the case then it’s prob worthwhile considering this 80%IO+10% P&I without LMI, so I won’t have to…[Read more]

Another update on obtaining finance from the bank, basically they are not able to offer anything above 80% LVR without LMI unless I cross secure with the existing property. Their best offer is to lend 90% with 80% IO for 5 years and the rest 10% at P+I (paid down in 3 years).

They were even offering to contact my accountant to explain why they…[Read more]

Ok I will ask the accountant about the tax implications of a trust gifting to beneficiaries and see if its worthwhile getting the lawyer to help review/amend the trust deed. My initial layman’s thinking is that it would still be perceived as a distribution hence taxable. Although I think if I set up other trusts in the future (eg for other…[Read more]

Thanks Terry

Ok I will ask the lawyer about deeds of gift and also ask the accountant. I am not sure about what you’ve written as follows:

“You would need to check the trust deed about whether the trust can gift to beneficiaries. Also check with your accountant if this creates any tax issues.”

How is whether the trust is able to gift to…[Read more]

Thanks Terry. I’ve attached a post you made recently in relation to gifting cash below:

hi Jack
Since you have a high income you should be able to knock that PPOR loan debt off in 1 to 2 years. After that you should have considerable cash available so I think you should seriously consider a discretionary trust. You can start gifting cash to the…[Read more]

Hi wanted to update on my progress seeking finance.

So far the bank has offered a separate choice package with the same 0.8% discount for the trust. They remain reluctant to offer more than 80% LVR without LMI, and want to know why we won’t cross secure the loans. Not sure if this offer is standard “market rate”. I am not sure if I should be…[Read more]

Thanks Terry for the information. It would be terrible to have to pay tax on the trust offset amount again. However I just thought of a disadvantage in “gifting” the money into the trust offset account. Basically that money will be locked within the trust from thereon and can only be “moved” between or within trusts, because say for example…[Read more]

Thank you very much Terry for the reply.

We will try to negotiate with the bank re: fees.

We plan to transfer money from the offset currently linked to the personal IP to the trust offset account, as a gift not a loan. However thank you for pointing this out as it does raise another important question –

As a lump sum “gift” to the trust offset…[Read more]

Hi Terry,Sorry to be responding to an old post but I have 2 questions in relation to your example as below.1. option two below is a better choice as the 50000 redraw to pay the IP deposit is tax deductible.  Is this the same as using a LOC (if the PPOR has increased in value) to pay the IP deposit?  If so, what do people mean by getting the LOC o…[Read more]

thanks.. I will have a look through the website.  McMaster's and Bongiorno are based in Melbourne but also have offices in NSW +/- QLD so I will explore them as well.

Thanks TerryHave been doing lots of reading into service trusts.  A few accounting firms have released newsletters in relation to setting up service trusts and their general advice is that as a sole practitioner with minimal overhead (general admin only, no office leasing or major equipment required), much like an anaesthetitst, that service…[Read more]

Hi Terry,Just wanted to thank you again for your advice and also to followup my meeting with the accountant yesterday.   As a sole personal service provider even if I set up a company the tax office will still see the company as a personal service company, and b/c I'm the only employee (not counting a "bookkeeper") all the profit will still have t…[Read more]

Thanks Terry, Sorry I misinterpreted the tables.  Thank you for the clarification.  In regards to interest only loans, I was reading your advice in other threads about extending beyond the general 5 year maximum.   The banks would re-evaluate your financial circumstances (presumably like re-financing?).  I got the impression from NAB last time…[Read more]

 NAB Choice Packageand NAB Portfolio Facility4 Interest RateComparison RateInterest RateComparison RateInterest in Advance/Interest Only in Advance1 year2 years3 years4 years5 ye…[Read more]

I'm sorry Terry I may have misinterpreted NAB's (who we're with under the choice package) interest rates list.  The IO rate is the same as the standard variable rate at 1 year but it depends on the number of years – the rates get higher as you approach 5 years.Does one decide how many years they want an IO loan and so then you pay higher interest…[Read more]

the other question is, given IO loans attract higher interest rates, is there any benefit in keeping the 1st loan on the existing personal property that's rented out as P+I?  Am I allowed to just tax deduct the interest portion?  the reason I ask is that down the track, we intend to keep the home and will have to move back after few years anyway t…[Read more]

Thanks Terry for your advice.Will be meeting with the accountant in 2 weeks but it has been really helpful at least to learn the basics.  I will speak with him about the service trust but my work equipment is so portable and admin fairly straightforward that I would only be able to justify a small amount of fees to use the service.In regards to…[Read more]

Limited Recourse – thank you for your comment. I am certainly hoping to achieve a long term goal to accumulate assets and if this means short term losses than so be it, as long as the initial structure is set up correctly..

Terry, thank you for directing me to read about the alienation of PSI rule and in doing so also looked at the general…[Read more]

Thanks Terryw for your advice.

However if I am the director of the separate company and earning income that way or just as a contractor with an ABN, wouldn’t diverting my income into the trust with the losses thereby reducing my taxable income, be considered “dodging tax” – esp when all the directors/appointers etc for the trust and companies are…[Read more]

Terryw wrote:
Well, its still difficult to decide because:- If you use a trust any losses cannot offset your personal incomes. If you add up depreciation expenses, travel expenses then there could be a large loss. maybe $10,000 pa. If in your personal name then you could tax maybe $3,000 in tax. Not so in a trust, unless you are self employed…[Read more]