It all depends….You could probably get around it. But you should seek advice before signing contracts.

You would proportion the cost base based on land size I think.

eg. you would need to value the land when split – value each portion and this would be the cost base for the land when you were to sell.

Also, be aware that CGT may not apply if you are constructing to sell. It could be just income tax. This may also differ between the blocks.

It is a complicated area so seek advice.

ideally you should be getting advice before you enter into transactions.

If you have a company then you may not need a trustee as there is a clear separation of the legal owner from yourself. Just make sure the company does nothing other than act as trustee.

Any remuneration would have to be at market rates. But if the trust has only one property the market rate for running it may not be too much.

Also, you will be living there rent free – so that would be an undermarket value transaction. Discuss this with your lawyer. You should read the bankruptcy act, esp look for claw back provisions and undermarket value transactions etc. ss120-121 in particluar.

You should also read the corporations act for the same – tho this is absolutely huge.

Why not talk to your accountant about paying market rent to your trust? The trust can then claim a deduction for all expenses.

Properties owned by a trust do not get the main residence CGT exemption. You probably won't get the land tax exemption either. What state is it it?

Does the trust deed allow a beneficiary to live in the property without paying rent? if not then you may find you will have to pay rent to your trust with there being a taxable profit which would need to be distributed to beneficiaries which could mean you end up paying extra tax on what would otherwise be a tax exempt purchase.

So it could end up in a triple whammy – income tax, CGT and land tax.

Why purchase B in trust if you intend for main residence?
What sort of trust is it?

Make sure you set up the estate planning side of htings too – succession of the appointor of the trust. Trust assets won't form part of your estate on death.

Property A could probably be sold CGT free

You need to carefully plan names on title as this will largely determine who will be taxed.
It will also generally determine who is able to apply for finance – although it may be possible to add people as guarantors in some circumstances.

You should be able to get the bank to process the FHOG for you so that it is available at settlement.

If you don't move into your property straight away it will be subject to CGT. You will get a partial exemption based on the non-main residence days/ days owned x CG or CL.

eg. If you sell within 12 months then half of the gain would be assessed.

if you sell after 3 years then 0.5/6 x CG will be assesed

Cross collateralising is when you use 2 security properties for 1 loan.

eg. PPOR and IP used to secure the 100% borrowings on the IP.

The better way to proceed is to set up a second loan in the PPOR and then use this cash to fund the deposit on the IP.

See section 118-145 ITAA 1997

This state you can still claim your property as your main residence, under certain conditions, even if you are absent for a period of up to 6 years. The actual wording under subsection 2 is "the maximum period that you can treat it as your main residence under this section while you use it for that purpose is 6 years." So this would mean, or I would interpret it to mean, that even if someone rented out a main residence for longer than 6 years the first 6 years could be CGT exempt under s118-145 (if all other conditions are met).

ATO document Losses and CGT minutes, June 2010 supports this interpretation.
http://www.ato.gov.au/taxprofessionals/content.aspx?menuid=43140&doc=/content/00260551.htm&page=14&H14

BTW, what state is the property in?

That rate is a bit high – how much is the loan amount?

Would be best for you to pay the min on the investment loan and any excess to the PPOR loan – so this means monthly, otherwise you would be making an extra month's payment to the IP each year.

If your PPOR would become an IP in the future then probably best from a tax POV to change it to IO, but this also depends on your spending habits. Some would be tempted to spend money in an offset account.