Pat

Terry is correct as always however there are just a couple of additional points worth mentioning:

1) I would assume you have probably taken the Anz Bank Lodoc 60 product due to your LVR. Even though you have been self employed for a year you could have raised this to 80% quiet easily. This would have freed up more available equity in your Line oF Credit

Also not a great lover at all of having a LOC on your IP unless it is to fund deposit etc.

You could take the Anz Bank 1 Year fixed rate and still get 100% offset.

2) Again watch the LOC on your PPOR even with the SGB Portfolio product.
    My preference like Terry's is an interest only loan with 100% offset.

    Be careful using SGB Advantage Pro Pack for any other purchases as it is a condition that all loans within the package are cross collateralised.

3) I like the Discretionary Fmaily Trust structure but remember it has negative gearing limitations.
    If you intend to use it for IP's then work out the numbers before signing the contract.

Your broker should be able to do it for you but unless he is experienced I would check the figures yourself.

SNM No unfortunately it will not be deductible hence my word of warning.

Choices would be:

1) Do nothing and the interest is not decuctible and the rent is taxable.
2) Sell the property and use the cash to fund the construction.
3) Sell the property into a Trust structure and borrow 100% of the Transfer value.

As long as you purchase the IP within a reasonable period of time then there will be no problem.

Probably easier to hold off the loan drawdown until you are ready to settle on your new IP.

One issue i can see is that you can only offset the current loan balance so your income cannot go into the same offset account as the savings balance will exceed the loan balance.

Make sure the loan on your IP also has an offset account to counter this.

Obviously when you draw down the amount for the IP deposit and costs the savings balance will fall.

Hi Ian

Yes you can backdate your ABN but this will bring with it question from the ATO.

I do not think you need to as mentioned.

RR I would argue it was a loan cost and therefore can be deducted.

It is the same if you drew down from a Line of Credit the interest would be deductible.

Dependant on the loan amount you would probably get together last 3 PAYG payslips and BAS returns for yourself.

For your husband maybe his 2007 Tax return although will only show part of a year and his last couple of BAS statements.

Also evidence of savings (i.e copy of your Bank statement showing the $150K) and lastest credit card statement.

Finally 100 points of ID for both of you (copt of drivers licence and Passport gets you there but if no passport maybe medicare card).

Hope this helps.

Hi Cadan

Remember your sole motive for purchasing property should not be for the Tax benefits as these can change over time with Government policy. Consider a property portfolio as a long term investment.

Secondly you are only able to claim the net interest shortfall at your highest marginal Tax rate and at $120K PA your highest marginal rate is 40 cents in the dollar. Of course Non cash deductions such as Depreciation and BWO can aid the cash flow situation.

Diversification of risk is my preferred strategy so 2 cheaper properties would be the way to go rather than having all of your eggs in 1 basket.

Mark

Personally i would not be paying down the debt.

An offset account will give you the same interest saving benefits however will retain the deductible status of the interest as well as the immediate access for the funds should the needs arise.

Remember one day things may change and you might purchase another PPOR where you have to pay for the interest.
Having cash in hand for a deposit could be a considerable saving in the long run.

A good mortgage broker should be able to assist you in the correct structure.

Hate to disagree but there are many lenders who are totally ok with a variety of Trust structures.

There are many Brokers however who do not understand these structures and therefore try and persuade you to purchase in your name.

Depending on your own situation and your eventual goals will determine what structure is right for you.

A good mortgage broker should be able to assist you further with this.

Hi Cadan

No the total LVR is considered when purchasing an IP so LMI will not be payable.

In saying this however i certainly would not be cross collateralising the securities when you buy the IP and would get your mortgage broker to structure the loan so that the IP loan is standalone. You can use your PPOR to take out a Line of Credit and cover the deposit and acquisition costs from here.

Structured correctly you will not pay any LMI yet will still borrow the full 106% you need.