It depend son your definition of ‘paid off’

There are 2 possibilities

A. Loan balance of say $400,000 with $400,000 cash in the offset account

B. Loan balance of $0 with an offset account (which offsets nothing)

With Option A the property isn’t paid off, but the loan is fully offset. If the cash in the offset is you personal cash, and not borrowed, and the loan has never been redrawn then if you moved out you could claim the full interest on the $400k once the property is available for rent.

With option B the property is actually paid off – but redrawing to use the money for a new main residence the interest will be a private expense and not deductible.

The situation is unclear because you say ‘paid off’ but also you state you have an offset account – which would be impossible if it is paid off, but possible if the loan balance is zero (but unusual). You also say ‘remortgage’ which implies there is not mortgage and if there is no mortgage the loan would actually be paid off – but you couldn’t have an offset account on it if it was!

Best not to park borrowed money in an offset because the interest may not be deductible when used.

If the $270k loan relates to the property purchase the interest on this may be deductible when she rents this out.

You should avoid cross in 99% of cases as there is no benefits to you.

But with 5 years to retirement you should avoid it even more. Get them uncross whenever possible.

Imagine you are nicely retired and decided to sell one property so as to get more expenses to live on. You find a buy and sell and after paying out the loan you will have say $200,000 cash which could fund your living expenses for the next 6 years.

Close to settle you send in the discharge of mortgage form. Your lender then asks you to fill in more forms – they then say, if you are not working you cannot afford to keep the other loans so the bank, to protect itself, will keep all that $200,000 and apply it to the other loans.

You now have nothing to live on (other than your other income) and have paid off investment debt.

I’ve had at least 3 people approach me as a lawyer to try to help them with these situations – but there is nothing that can be done when one property secures many loans. Each of these persons has had their retirements, and lives ruined.

One poor woman had about 3 or 4 properties and living on the rents which were low – about $20,0,000 per year. She didn’t qualify for the pension because of the asset base. She decided to sell one to get the proceeds to live on. She sold it and the bank took the lot. She now had even less to live on cause one rental income was gone. The loans were PI was paying down the remaining ones didn’t change the repayments per month but just left her with even less interest to claim, so the situation was actually worse.

Yes it is a legal requirement to disclose your assets and liabilities truthfully.

4. No it is not illegal. If fact it is the opposite. The lender has a duty of care to make sure they don’t lend to people who cannot afford a loan. If you are going to be over a certain age at some point during the loan term, often 75, then the bank will want to know what your exist strategy is – how are you going to repay a loan when you are not working. St George just updated their policy on this 2 days ago.

In some states the first mortgagee needs to consent to a second mortgage bring lodged, in other states no consent will be needed.
Most major lenders will consent, but they want all parties to enter into a deed of priority so that they can be sure they will come first. I am not sure if they can refuse consent or not, but contractlly you are probably agreeing not to allow a second mortgage without getting their consider – you will be agreeing to this in your loan agreement with them.

Keep in mind that a mortgage can still be effective if it remains unregistered – but less secure for the mortgagee.

A lender won’t lend any more money if there is a caveat on title.

Refinancing may not be an option if the values have dropped. If the LVRs are still adequate it may be your best option however as you can start a new fresh IO term and also extend the total loan term to 30 years which will make the minimum PI payments lower when it does revert. but you will have to service to do this.

– And they have the ability to transfer the units of the trust into their SMSF later on – perhaps when the property is cashflow positive.

moving money around between loans won’t increase deductions, but it will result in a mixed loan and may actually decrease teh amount of interest you can claim.

Seek tax advice.

If you enter an option agreement you would have an interest in the property and could seek out buyers of it.

Yes you could do that.

That would form part of your costbase.

To work out the cost base we need to know the costs for the 5 elements described under Section 110-25 of the ITAA 1997 which are:

1. Money paid or required to be paid for the asset.

2. Incidental costs of acquiring the asset, or costs in relation to the CGT event, for example, stamp duty, legal fees, tax advice, and so on.

3. Non capital costs you incur in connection with your ownership, for example, interest, rates, land tax, repairs and insurance premiums (provided not previously claimed). Included are any expenses incurred while the property was an owner occupied property.

4. Capital expenditure you incur to increase the value of the asset, if the expenditure is reflected in the state or nature of the asset at the time of the CGT event.

5. Capital expenditure you incur to preserve or defend your title rights to the asset.

You mean your costbase?

No, those calcs are not correct. What about the value of the property when you received the gift?