Thats a large risk. No lawyer and unconditional now!

Why not pay off the home loan sooner and buy an investment property? Not mutually exclusive.

You're right in that you cannot borrow from yourself. You can borrow from third parties and the loan would generally be deductible and you could refinance it with another lender. Just need to make sure you have a written loan agreement and set it up properly.

Perhaps a discretionary trust would be the way to go rather than family.

In the past I have had problems with CBA when trying to sign loan agreements with a power of attorney – they refused to accept them because of privacy concerns – the attorney would see what the donor's financial situation was and also potential problems later proving that the borrower did not understand their obligations. Under the Power of Attorney Act an attorney can bind the donor and basically enter into any agreement that they can legall enter (subject to any restrictions in the deed) but there are no requirements for others to accept them.

In the past I have had luck with ANZ and Westpac.

It may be able to be done, but as trustee of your smsf you would be not acting in the best interest of your fund by putting all of its cash into the one investment. Consider carefully if this is the case.

It may also be possible to join with a spouse or others to pool your super money together. Many issues here to though.

There are 2 ways to do it:

1. Have a company act as trustee for a discretionary trust.

2. Have a company own the property outright and a discretionary trust own the shares.

This will involve the trustee as the legal owner, but the beneficial owner of the property will be the beneficiaries of the trust. With a discretionary trust no one beneficiary has any fixed entitlement to the assets of the trust. So the property of the trust is onwed by no one individual but by the group as a whole. This group could be 1000+ potential people. Since there is no fixed entitlement a trustee in bankruptcy cannot take over the trust – they would become just one of the potential beneficiaries and a trustee would not get hold of the assets if a beneficiary were to go bankrupt.

A director of the trustee company controls the trust and its assets. This is a role, like employee, but not property. The appointors of the trust controls who the trustee is, so this is the role that controls the trustee. The position of appointor is not property either and cannot be taken control of if the the appointor were to go bankrupt. ie the trustee in bankruptcy couldn't step into the role of appointor.

1. Is preferrable as the 50% CGT discount will be avalable on the sale of the proeprty.

There are several reasons to buy in a personal name:
1. Access to the CGT exemption for main residences
2. Access to CGT exemption for an absence from your main residence
3. Land tax threshold
4. legal simplicity
5. tax simplicity
6. Your houses will form part of your will.

It may not be as bad as I first thought if you are never taking any money out for private use. But it can still disadvantage you. I can think of 2 ways:

1. eg.

Your LOC loan is $300,000 and you are putting in excess cash each week from rents, say $5,000 and your interest is $4,000.

Each week your balance is dropping by $1,000.
After 1 year your LOC balance would be down to $248,000. This is good because you are paying off debt.

But if you had used a offset account you could be better off. First, you may receive a 0.1% cheaper rate than a LOC. And secondly your loan balance would still be $300,000 and the offset $52,000. This would result in the same interest (or less considering the cheaper rate), but you would have $50,000 cash available.

If you wanted to buy that ivory back scratcher you always wanted you could take the $50,000 from the offset and in effect claim the interest on it, even though it is a private expense. With a LOC you couldn't.

2. Imagine you have 5 IPs and a mixed LOC – mixed because you used to put rents in and expenses out etc. very hard to track.
You then sell one IP – how much of the surplus money do you need to pay the LOC down by? You cannot continue to keep claiming interest associated with loan to purchase a IP after that IP is sold (usually).
–

If you are using a LOC just for deposits then it should be easy to work out the interest for each property – you would need to attribute interest for each property in proportion to the borrowings. Overall it won't make any difference to your overall tax if you get it wrong – but it will when you sell.

But if you are just boworring $39,000 in Jan, and then $61,000 in Feb etc, then in Jan 100% of the interest will be for property A and in Feb 39% for property A and 61% for property B. (roughly – will be different because you need to calculate number of days in month etc).

That is why I think it best to unravel now before it gets messier.

I agree with Richard.

Don't use your offset account money as this is personal funds and will be needed for your future PPOR. You have plenty of equity so use this to borrow 105% of the new property (without crossing loans).

Most of the brokers here understand loans for trusts.

hi Ptn

Sounds like you don't understand trusts – no offence meant, but keep on learning.

The $50k cash equity, is this cash or equity? If it is cash can't you just borrow it off the trustee?

Who is the trustee now?

The company can pay you a fee – but why would you want to do that?

The trustee is the legal owner of the assets of the 'trust' so all assets should be in the name of the trustee.

Maybe you are trying to increase your borrowing capacity by having the trust pay you a fee? This won't really work as the banks will want to see the tax returns of hte companies and trusts which you are associated with. The fee will also be taxable income to you.