Did you live in the original PPOR before renting it out? And while renting it out did you ever have another main residence?

Yes, me Sydney too. CBD. my email is [email protected]

Well  thats what you can expect with a vague clause  -works in the favour of the purchaser in this case. I think you should let it slide and resell. Next time someone tries a valuation or finance clause try to be very specific – name the bank, time and amount that must be approved and how they are to notify you if it is not approved.

You should seek legal advice before entering into contracts.

can your prove your income? Are you willing to show 12 months BAS statements and trading accounts and do these reflect the income you will declare?

A trust is where A owns something for B.

Easiest way to understand is to think of a parent opening a bank account for a 2 year old. The parent is the legal owner of the account, title is in the name of the parent. The parent is the trustee. But it is the 2 yr old who really owns the money. 2 yr is the beneficial owner or the beneficiary.

So a trust is where the legal ownership is separated from the beneficial ownership.

If mum goes bankrupt can they take the money in the account? Generally not because she is just holding it for 2 yr old.

Similar with property. You will have a trustee, which could be a company or a person. But you will also have many beneficiaries. The trustee just owns the property, legally, for all the beneficiaries of the trust.

Where it is good is that the income of the trust can go to any beneficiary (under a discretionary trust). So the trustee (which you want to be or to control) decides to distribute the income to the lowest tax payers of the group – the potential beneficiaries may be hundreds of people but the ones that control the trust will generally limit the distirbutions to benefit their close family.

It is good with bankruptcy too. Because if any one beneficiary were to go bankrupt the trustee would simply not give them any money while they are bankrupt – otherwise it would go to creditors. If the trustee were to go bankrupt then the trust assets don't belong to them so they are generally not able to be taken.

But if you are looking at buying real property then there are many things to consider – trusts generally pay more land tax. The trust is a separate tax entity so any loss cannot be used to offset your personal income. Also trust taxation law is very complex so higher fees.

Fixed loan may complicate things.

Can you give some rough figures of what the portions used were?

Ok, mayor quinby here.

You have accidently ended up with a mixed purpose loan by combining business with pleasure. But all is not lost because the ATO will allow you to split the loan and recover.

In my eg above you had a $100,000 loan.

You could simply split this up into 2 separate loans of
$10,000 for the investment and
$90,000 for the main residence.

Then you can relax and start paying the $90,000 loan down asap and saving non deductible interest while maximising deductions.

Hi Adrian sorry didn't mean to scare you!

You can generally claim costs associated with running a home office but not rent unless you are self employed. The office needs to be your place of business.

What you have done is to create a mixed loan.

eg you had $90,000 outstanding on your PPOR loan.
You borrowed $10,000 from redraw and used for investment

This is just a $100,000 loan in which 90% of the interest relates to the PPOR and 10% to the investment. So 10% of the interest each month should be deductible.

But, there is a problem because any repayments you make to this loan will need to be apportioned. So if you pay $1000 per month then $900 needs to come off the PPOR portion and $100 off the investment portion.

This is not ideal as you will be paying down investment debt when this could be coming off your PPOR debt.

So, what I suggest you do is to split your loan asap. You will then be able to divert more money to paying down non deductible debt and improve your tax position. It will save you thousands over the years.

You might even take the opportunity to refinance and get a better rate while improving the structure too.