Thanks Richard – its starting to make sense now..

Though Doesnt the bank normally want to know where the money/deposit was from?

If the loan is from the vendor and IS repayable is that OK, ie. the valuation shouldnt be adjusted down?

I suppose the bank will also want to factor in repayments on this portion in the buyers serviceability would they?, what if its a interest free loan for say 3 years?

Cheers
Grant

Thanks for that.

So assuming trust splitting not used how much stamp duty would we be up for?
Is it based on end valuation of units – but we each own 50% share originally so is stamp duty 50%???

Thanks
Grant

Hmmm,

So if your projected income is some capital gain from selling a house the profit might be 100k. But the after tax profit after 50% CG dscnt and all other deductions might be 30k? Or less if a trust involoved.
So on your tax return its 30k.
So is your Lodoc income 100k or 30k???

Thanks
GRAnt

Hi Joshua,

Do u have a link to that ATO article? I had a search but the only thing I can find is people being fined for understating thier income in thier tax return or not even submitting thier tax return.
But im not talking about that, rather what can be included in Lodoc income. Especially profit from selling a property.

Thanks
Grant

Thanks Terry,

Dont worry my wifes got list of jobs to keep me busy for a decade or so…

I sort of thought carrying forward losses might justify it so I’ll keep claiming. But at the moment I only have a discretionary trust.
Given my plans would u think it worthwhile setting up a HDT??
Could I use a HDT now but have it work like a ‘normal’ trust, but then sort of switch it easily to a HDT if things change later on?
Is there a lot of extra work tax time with HDTs?

Sort of a side issue I read on one accountants web site that HDT were a ‘grey’ thing with the ATO, and should not be used!!
Has any one had any problems with ATO & thier HDTs??

Thanks
Grant

Well I emailed my accountant and heres his response for general info.

“When determining the deductibility of interest, the key determinant is the use the funds are put to.
If you borrow funds, and park them in an interest bearing savings account from where you immediately purchase an income producing asset, then deductibility will be preserved.

The purpose and use of the borrowings is clearly to produce income.

In the case of repaying the loan from your friend, the funds move from the loan to your account and then to your friends. the original borrowing from your friend was for an income producing purpose, and the money borrowed from the bank to repay her will retain that character, despite the short trip via your bank account.

The major issue you must bear in mind is where loan funds are used for mixed purposes, or where a repayment of the loan is made, and then subsequently redrawn.

These changed purposes require you to split the interest between deductible and private – this is where the link can be broken.

Tax Ruling 2000/2 deal with some of the concepts in this area, and is attached for your reference.

This quote is one of a number that illustrate the process.

14. Where borrowed money applied to a particular use is recouped and redirected to another use, it is necessary to examine that new application of those borrowed funds in considering the deductibility of interest. Where there are changes in the use of money borrowed under a line of credit facility, or in the amount of borrowed money used for a particular purpose, the deductibility of the interest accrued on that part of the outstanding debt will be determined by considering the advantages sought from that new application of those funds.
Interest will be deductible under section 8-1 to the extent that it is incurred on that part of the outstanding borrowed money used at that time for an income producing purpose.”

So sounds like I should be right (I think..)

Grant

Thanks Terry,

OK, what if the savings account is an offset account?
So that when the expense is paid from that account the interest bill that month will increase?