You should seek advice on using the LOC to pay for loan repayments. What is your purpose in doing this? ATO can apply Part IVA and deny your deductions.

For a development it would be a good idea to use a separate structure such as a discretionary trust with a corporate trustee (not beneficiary, but could be that too).

But the trouble with your set up is that all your assets will be exposed by the need to give a personal guarantee. If the trust is sued then having a company as trustee will assist you protect you other assets, but if the development fails the bank can come after all your assets.

Trusts need to distribute income or the trustee will be taxed at the top rate. If your trust can only distribute to people on the top rate then there will be no tax savings.

But most discretionary trusts have the ability to distribute to a company as a beneficiary. So what you could do is set up a company and have the trustee distribute to that. Companies pay 30% tax which result in some savings.

The company could then onlend money to the trust, with tax advice, and the trust could buy more property. Eventually you may want to get some money out of the company and you could do this via dividends when you are on lower tax rates, or as loans (careful).

The great thing about discretionary trusts is the flexibility. Distributions can be changed year to year at the discretion of the trustee and this is something that buying in your own name cannot assist with.

eg. Imagine if one spouse stopped working for a year due to sickness or pregnancy, or travel etc.

Kids can only get $416 from trust income per year without being hit with penalty taxes.

But, a trust set up under a will or post death in some circumstances will have its income classed as exempted trust income and a child can pay tax at adult rates. This means roughly $20,000 pa fax free per child. So make sure you consider a discretionary trust in your will.

Yes, It workers and engineers love the old spreadsheets

No they can't do that unless If either one of them has met a condition of release they may be able to get a lump sum.

There is a condition of release met if:

1. over 55 years of age and work less than 10 hrs

2. financial hardship

3. temporary or permanent disability

4. terminal medical condition

Just out of interest are you an Engineer or IT worker?

If the nominee isn't in existence at the time of the contract then it may be a problem.

Not sure why you are talking about redraw facility?

Whether to took the $50,000 from the loan yesterday or 29 years ago it is still what that borrowed money is used for that counts. ie the $50k seems to be used for a private expense and will not be deudctible.

Furthermore if you increased the loan or use redraw (maybe this is what you mean?) the result is the same. And you will end up with a mixed purpose loan which will make things less than ideal for future tax deductions

I must disagree Tony. Most realestate contracts for the sale of land are not subject to finance. And for an off the plan sale they are virtually never subject to finance and couldn't be.

Off the plan means the plan of sub-division is not registered therefore finance couldn't be approved until this happens. This would be about 2 weeks before settlement usually. No vendor is going to enter a contract with someone for 2 years with a clause giving them a way out 2 weeks before settlement. They couldn't find another buyer in time at this stage.

Thanks Tom,

this is interesting

http://www.austlii.edu.au/au/legis/vic/consol_act/da200093/s32c.html

I think you may be correct in your interpretation. I don't know of any similar provisions in NSW either.

The op should check this out with their lawyer. Point this section out to them if they say stamp is payable again.

Hi Tom.

I have never heard of anything like this.