Yes there would be issues – a non resident trust would be taxed differently to a resident trust. Residency may be decided on where the trustee is located and/or where the central management and control is. Also a company must have at least 1 resident director.

I don’t know much about this area, but Paul at PFI would.

Connective is the best. I was with them, left, but have now gone back.

First timer wrote:

Then in a years time move into the IP and claim the LMI as taxable debt on the old PPOR?
Thanks again

You can do that, but would the LMI be deductible? I don’t think so because it was incurred because you increased the loan to buy a new PPOR – a private expense.

However, You might be able to argue that the LMI relates to the whole loan and at least part of it will be deductible.

Borrow any extra $80k from the PPOR as a separate split.
Use your cash as deposit to avoid LMI if possible
Borrow 80% of the new property, IO with 100% offset

Quickly convert the existing loant o IO with offset if you can.

Until you move keep all cash in the offset of the existing home.
Once you move take your cash with you to the new home and its offset.

Use separate banks if you can.

And consider timing – when to move, considering land tax if applicable.

When you move out of the old one get a valuation done as this could be the new cost base.
No valuation needed for the new one when you move in, but keep a record of all expenses while you are living there as that can be used to reduce CGT when you sell.

Plenty of tax and legal issues here. You should seek specific legal advice.

firstly does the trustee have the power to allow a beneficiary or a relative of a beneficiary to live there? If so can this power extend to under market value rent? (if you are a beneficiary she probably is too).

Does the trustee have a loan on the property? Would they be claiming interest or other expenses, if so the interest and other expenses would not be deductible if under market value rent is charged. Deductions may be limited to the rent received – your accountant or tax agent can cover this.

How will the trust pay for any short fall of expenses over income?

Lease in place? Should it be a lease or a right to occupy? If a lease what about the legal requirements for a bond.

What happens if you die?

What about disputes – how will these be handled?

What if you lose control of the trust?

Centrelink issues too perhaps.

it might be better if she pays market value rent and you could gift her some money separately.

DeanCollins wrote:

Hi Terry,
Sure….but when the bank that secures your $400,000 loan says….sorry but we aren’t lending you any more money on a property that they already have a mortgage on….? then what?
eg you are in the same situation as I am for the St George Portfolio loan…..
Surely you aren’t suggesting a secondary mortgage right? eg a bank to take the second mortgage on the additional equity? I didn’t think that they even had those in Australia.

In that case you have 2 options:
1. stay put, or
2. take your $400k loan and refinance with a lender that will lend.

When cross collateralised you won’t have the second option.

Bank staff are often involved with deception, or fraud. Just make sure you try to cover yourself by getting evidence in case this non disclosure blows up.

Can u not just change products?

Pete

Not many people can keep on buying properties these days. Even with high incomes. I had a client the other day on $250k with 5 properties with 50% LVR. I though serviceability should be fine for another, but after checking it was very tight. We were just able to squeeze in one more.

You will probably tap out very soon.

Do you mean you have a loan of $266,000 in total? If so that is a good LVR. You would almost be debt free taking into account your cash.

What about your home where you live – renting or paid off?

It is probably better not to use your cash as deposits but to borrow the deposits – you have plenty of equity it seems

You have basically got 3 options
1. decrease expenses
2. increase income
3. Do both

Sounds obvious!
Check that your rate on the loan is as low as possible.
Are yo claiming all deductions?
Depreciation schedule in place? Travel? Borrowing costs
Debt recycling strategy in place?
Borrowing to pay costs?
Is capitalising interest or borrowing to pay interest an option (get tax advice)
How can you increase your wages
Increase rents?