Hi

With a bare trust, I beleive a short document is signed and this is kept. It is not needed to be lodged anywhere. However, at tax time, it is suppsoed to be the beneficial owner who declares the income on their tax return. So if this is an investment property, then that may leave a paper trail.

Other problems include:
– what happens if the trustee is sued and you cannot prove they only own the property as trustee for you?
– what happens if the trustee turns against you?
– what about finance? The trustee would have to obtain it, and tell the bank about the trust or possibly lie to get finance.

Terryw
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try http://www.lawcentral.com.au or http://www.cleardocs.com.au but be careful.

Terryw
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Hi Donald

eg. If someone were to use a LOC on an investment, and then have their wage deposited in to the LOC account, the ATO would class this as a repayment. If they took money out to buy food, then the interest on this would not be claimable as it would be new borrowings for domestic purposes. Over time this could lead to their deductible portion of the LOC rapdily reduce, while the non-deductible portion increases.

However, if a offset account was used, interest saved would be the same, but since its a separate account to the loan, there would be no new borrowings when money is withdrawn, and therefore, no problems in claiming interest. Certainly less messy at tax time.

Terryw
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I agree with Steven

There can be serious tax implications with using a LOC. Offset is much simpler

Terryw
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Hi Liz

I cannot see any reason why the tax implications would change due to cross collateralisation. I agree with Tom.

Sometimes it can very dangerous listening to people working in Banks.

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Hi Redwing, I’m in Bangkok at the moment.

Terryw
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go to http://www.lawcentral.com.au and look at their legal documents for sale. There is one there called joint property purchasers agreement (or similar)

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I havent heard of many people that wrap commercial ppty, but it could be done, and may be a lucrative market.

There is nothing to stop you offering hgiher LVRs if you are comforatable with the risk.

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A brabd new trust can actually get finance up to 95% easily. If you are looking at low docs, then you would need to prove that you are self employed for 2 years. The trust can be brand new however. You can prove you are self employed by your existing company.

It should also be possible to get 80% LVR on a low doc with a company as trustee.

One more point, you probably should not use your existing company as trustee, as any claim against the trust would effect the company – which could be bad if it is trading.

Terryw
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If you sold to a new hybrid trust, you could keep the old trust and the loss and keep carrying it forward. Future income from other investments may then be able to be distributed to the old trust to offset the loss.

With a trust, i am not sure if the Capital gain (if any) can be offset from the loss as these are different income streams.Better check this with your accountant (maybe a new one?)

Terryw
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