I’ve never seen Ed Burton’s book, but it would be way out of date now.

the best way would be to borrow the deposit under a separate split secured by any property and then borrow the remaining 80% secured against the new purchase.

Don’t use redraw

Yes it is.

You could give 2 forms of security –
1. the property
2. a term deposit

e.g.
$100,000 purchase price with $5,000 duty and costs = $105,000 needed.
Place $25,000 in a term deposit and borrow $25,000 against this
Borrow $80,000 secured against the property

But this will be a bit painful for the banks to implement.

What about the…[Read more]

Hi Gavin

This quote seems to be from material is copyright – do you have authority to post it?

This is standard asset protection stuff. The gift and borrow back strategy has been around a while and some lawyer even tried to patent in years ago – but failed.

But,
Creditors can still attack these schemes under both state law and commonwealth law…[Read more]

I should also point out land tax varies from state to state – sounds like Stoksey is talking about VIC. Land tax is worse for trusts in NSW, but better for trusts in QLD.

I just had a client sell the former main residence to a fixed unit trust. They borrowed to buy the units in the trust and can claim the interest. The borrowed money will then be used to pay off the new main residence debt.
ATO allowed this under a private ruling application. No CGT payable, but stamp duty was payable in full – however they will…[Read more]

Hi Jon

Re the LOC – some lenders allow their IO loans to be used like LOCs. The main issue I see is people borrowing money, parking it in a savings account and then investing. This will render the interest non deductible or partially deductible because once the borrowed money hits the savings account and mixes with cash once you use the money you…[Read more]

If you want asset protection from creditors then there is only one solution – a trust. That is a discretionary trust or a SMSF.
But the strength of the asset protection will depend on the terms of the trust and the structure of the trust.

You could also buy assets in the name of someone else – but this is really a trust like relationship which…[Read more]

In that case it would be similar to John in my example above

I don’t understand what you mean.

Example

John has a loan of $80,000 secured by an investment property with plenty of equity. The loan relates to the purchase of that investment property.

John now needs $20,000 for an urgent kidney transplant.

John increases his loan to $100,000.
Going forward 80% of the interest should be deductible.
This is…[Read more]

The interest would not be deductible.
You would be borrowing to pay a private expense – doesn’t matter how many detours you take.

Yes I can back that up with authority.
You could read the case of ‘Domjan’ for starters.

Your clients should seek tax advise asap.

Hi Fintrack

I think you have confused a few things. Loan purpose for the original portion stays the same, but it can get messy.

If you redraw from an investment loan the interest on the loan doesn’t become non deductible.

There are three ways it can end up
1. You withdraw from an investment loan and use those funds for that investment p…[Read more]

If it is an investment property and will continue to be then you should have claimed the stamp duty back then. It is probably too late to amend that tax return now, so you may have to wait till you sell to claim it off your CGT.

ACT is different to other states as the land is leasehold and the stamp duty is not paid on the transfer of land but on…[Read more]

Rex, Consider what could happen if any of the following were to occur

You
1. die
2. divorce
3. become bankrupt
4. become incapacitated

And what would happen if the other person were to
1. die
2. divorce
3. become bankrupt
4. become incapacitated

Keep in mind there only about 3 lenders that will assess you on your share of the joint debt. The default is you will be assessed on all joint debt but your share of the rent.

Best way would be to pay cash or to borrow against other property. But this is not possible for most.

If you use a trust structure personal guarantees will be needed. There is a way to structure it so that only 1 guarantee is needed – and it thereby affect only one, but whether this is suitable or not will depend on other factors.

You had better get tax advice asap.
The second one cannot be CGT free as the exemption doesn’t apply to land. So when you split the land portion relating to the second property will not have any exemption back to the point you purchased it.

First step is to work out if CGT even applies. “Developing” generally means income tax and not CGT so no…[Read more]

Yes Rex, that is it.

Rex – it depends how you structure it. Generally they will be liable for any loan they are a part of or any guarantee they give.

If you go to a separate lender for the new loan and get the loan in your name only (or without them) they they cannot be liable for this.