Forum Replies Created
Thanks Del.
Cheers
Stu
Sis, I did some Corporate Finance work for St George when I was at Deloitte and I can’t see it happening. NAB was going to be the most likely bidder but they are in no position at the moment.
I agree with Rob that it would have considerable ACCC issues if one of the Big 4 banks offered.
The only reasonable potential purchaser would be a foreign bank (similar to Bank of Scotland buying BankWest).
Cheers
Stu
It’s been a while since I studied this but I believe that the ATO could deny any deductions (e.g. they may say that you are only able to claim 7% of interest expense and not 12%) if they believe that the primary purpose for entering into the arrangement was to avoid tax. This is a complex issue and comes back to the question of tax planning versus tax avoidance.
I would think that the 2% versus 12% is extreme and the primary purpose is to avoid tax. I don’t think this would work. (Unless you can come up with another reason for charging different rates)
I know… you can argue either way but intuitively I think the ATO would knock it on the head.
Cheers
Stu
Are these posts referring to my post (re: greater discount for owner occupy property and less for investment)?
If so, as a Chartered Accountant, I don’t think there will be any issues:
1. The differential is not extreme (5.97% for owner-occupier and 6.57% for investment).
2. NAB (the lender) has less ability to discount interest only loans (because they consider them higher risk than P&I). Therefore, it was easier to price this deal by getting a lower rate on the “less risky” loan (owner-occupy). This is a good justification for the structure. This proves the primary purpose of the “scheme” (as the ATO likes to refer to them) was not to avoid tax.I think it would be difficult for the ATO to argue this is falls within the anti-avoidance provisions (Part 4A). We have what’s referred to as a “reasonably arguable” position.
Can brokers advise on this?
Absolutely not! This was a unique situation. I am a Chartered Accountant. The client was a lawyer. I discussed the structure with the client’s accountant.Cheers
Stu
Sapphire will do (normally have good fixed rates):
3 years fixed: 6.79%
5 years fixed: 6.99%http://www.sapphiremortgageservices.com.au/rates.asp
Cheers
Stu
This is not relevant. To answer your original questions depends on your preferences, objectives, etc, etc.
It’s like me asking where I should invest my money? No one can answer that question until they know what risk I want to take and my objectives, etc.
Therefore, contact a broker and get a second opinion.
Cheers
Stu
God help you Wilko… I think the suns getting to you. Honestly, they should just build a big wall along the NSW border and isolate you guys.
Cheers
Stu
Pisces & Rob, play nice… I have deleted those 2 posts… any further defamatory posts will be deleted.
Both you guys add a lot to this forum. It would be a shame to see you two banned.
Please, please refrain from saying anything to each other!
Cheers
Stu
I don’t care for Rugby! I am Victorian. We only like AFL.
Cheers
Stu
I would agree with Rob (based on his assumptions). (although it is hard to comment as we don’t know what’s important to you, your objectives, loan structure, amounts, etc.)
Cheers
Stu
Rob, Wilko is in QLD. Therefore, anything over $250,000 gets 0.70% (NSW & ACT it has to be over $500k).
St George has break fees of $1,000 for 3 years. Their Portfolio loan encourages you to cross-securities (in fact it’s all in one) and can be expensive every time you add another property to the loan.
St George is ok if you aren’t going to change your lending too often. They are a bit light on borrowing capacity.
Cheers
Stu
Yes, you are correct. However, the second point is moot. You can direct you income wherever you like. However, if you choose not to make repayments on your tax deductible interest then you can’t keep on claiming interest on interest.
Cheers
Stu
Well it’s good that you are here to correct us Nat.
Are you saying that a securitised lender has just as much flexibility as a non-securitised lender? For example, CBA will do 80% just about anywhere. However, ING will not. It was my understanding that this is because of the securitisation process in that they mortgage insure all or some of their portfolio?
Cheers
Stu
So I guess you’re not going to stop it!
Remember that defamatory comments are not allowed on the site so I will just delete any response that contains these statements. Maybe then you will see this silliness is futile.
Cheers
Stu
Pisces, Rob… settle down you too. Stop being childish and unprofessional! We all have to respect our differences of opinion and there are make ways to skin a cat. There is no right or wrong… just different approaches.
Your constant digging at each other ruins the feeling of the forum. It would be great if you could stop it. Thanks.
Cheers
Stu
Personal loans can be arranged very quickly especially for this amount… usually within a week. Don’t use the same lender. CBA are advertising that you can apply over the Internet and you never have to meet in person and they say they will give you an answer in two days. See http://www.commbank.com.au/getitfaster/
Cheers
Stu
I guess you could always do your own but it’s often best to get a professional one.
If you are going to claim depreciation you need to have a basis for your calculation. The schedule is normally a good basis.
So in short the one time you don’t need one is when you’re not going to claim depreciation.
Cheers
Stu
Rob
I understand what you are saying however perhaps they make an exception where family trusts are concerned. Perhaps they “look through” the structure to realise that the trust and individual are essentially the same people. Maybe if there is a relationship between beneficiaries and the individual (i.e. same people) then they are happy.
I don’t know what there thought pattern is but there is no question if it can be done because I have had clients do it.
Cheers
Stu
Hi Rob
The lender still takes the first mortgage over the property but this is taken through a guarantee (provided by the trust). Therefore, the loan is fully secured.
This is similar to St George’s Family Pledge loan where parents can provide additional security via a guarantee.
Cheers
Stu
Thank you to everyone for their input. To answer a few questions…
Jo, CGT is a good idea. I am a Chartered Accountant and worked for two Big 4 firms so I am qualified to write on this topic (Derek – not a financial advisor).
Mark, some good ideas. Thanks. I did an article on borrowing capacity and the effect of purchases. It’s called Unlimited Finance.
Derek, I’m pleased that you have a good mortgage broker but does that mean you have stopped learning? I try and read as much as I can because you never know what you may learn. I am not saying it about my articles but just a general comment. I have a good marketing consultant but I still read Marketing Mag cover to cover.
Liz, I like that idea a lot.
Rob, I’m in Melbourne.
Gatsby, this has been covered in my loan structuring article. Thanks anyway.
Cheers
Stu
