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Yes Kay, that’s a fair point!
Terryw
Discover Home Loans
North Sydney
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Another spin to the idea.
What would happen if the investment property were to be owned by a trust? How would things differ?
I would imagine it would make things easier to justify to a certain extent. The trust is a different entity to the person.
So if there were expenses such as rates, insurance and interest, then the trust would be able to borrow from the person (LOC) to pay for these expenses.
However, the income from rent would belong to the trust. It would therefore probably have to go into the trusts accounts.
It could go into a separate account, and could be left to accumulate. The trust could still borrow to pay expenses.
Maybe if the trustee was the same person as the PPOR loan holder, the trust could use a 100% offset account setup attached to the PPOR loan.
This could have the same effect of all income going into the offset (which saves interest) and all borrowings coming from the LOC (which increases deductions for the trust).
However, if the trust had no other income, these deductions would probably have to accumulate to be offset against future income of the trust.
Please note I am not an accountant, and am just thinking out aloud here. I don’t know if any of this would work.
Terryw
Discover Home Loans
North Sydney
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Yes. I would be doing this for reasons other than to save tax. I am just not sure on what these reasons are at the moment! Probably cashflow reasons.
Terryw
Discover Home Loans
North Sydney
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Thankas again Coastymike for your kind words.
Collie you shoulod probably get a copy of the book “Trust Magic” if you haven’t already. Heaps of good info about trusts, including a bit on Hybrid’s. and it is written in a very easy to udnerstand way.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Imagine being ripped off for $36,000 and then consoling yourself saying, well at least I will get $18,000 back on tax. And then this!
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
I agree that this is not wrapping.
It seems that the organisers were real estate agents and were inflating property prices and selling properties to unsuspecting victims. They gave misinformation to the bank and used the bank’s policies on valuations to obtain loans greater than the property value.
Terryw
Discover Home Loans
North Sydney
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Bob
Yes that could be correct. If you rent out your home you could still claim it as your main home for up to 6 years – as long as you are only claiming one main home.
Terryw
Discover Home Loans
North Sydney
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Clay
He “live in Bathurst and work in sydney”
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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If it is your PPOR, then there should be no CGT issues – unless the place is rented out at some stage, or used to produce income.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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It depends on which state you are in. In Victoria I beleive it is payable at settlement. In NSW it is within 3 months of signing a contract (expect maybe for land?? I purchased land off the plan and did not pay it until settlement).
If you chose not to pay it, interest will accrue at around 13%pa. So it won’t cost you too much to delay it.
Terryw
Discover Home Loans
North Sydney
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Many lenders will be able to finance up to 4 units on one title as residential. I was just talking to Heritage Building society about his on Friday and I think they will do up to 6 on one title.
You probably would be able to get over 80% LVR though.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Good points there Mike.
Yes it is possible to do it all yourself, but it may work out better by going to an accountant – especially for your first one. However, those sites have some very good information, and even if you do not intend to use them, you should register and read their material on tursts.
On going costs would depend on what sort of trustee you have, and on how many properties, shares etc the trust owns – And the quality of your accountant!
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thank you for that Julia. So in summary, I think Julia is saying it could work to a certain extent as long as it was not a scheme and as long as the dominant purpose was not to increase tax deductions. But maybe Julia was referring here to capitalising interest only.
Would paying interest with an LOC (ie borrowing) be classed as capitalising interest?
Before reading Julia’s post I contacted an experiences taxation advisor (with approx 30 years in ATO). I told him about this scenario nad his comments were along the lines:
– There is nothing against borrowing to pay interest.
– even if you had cash to pay itnerest, there is nothing to stop someone borrowing to pay the interest
– it would appear to be an acceptable way to operate
– you would have a stronger case if the home loan and investment loan were with different lenders.But, he did say that to be sure, he would have to conduct further research.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
In that case, if you use a trust, all income will be able to be distributed to various beneficiaries each year at the trustee’s discretion. The class of beneficiaries is usually very wide and would include most of your relatives (even those yet to be born).
So if the trust has income, then there is no need to employ people.
A trust could employ people – like any business. But then you are up for all the rules and regulations – may need insurance, work agreements, must pay tax, superannuation etc for them.
It is probably better to just distribute $$$ to them if not running a business.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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If you can actually pay cash for a property, you could then apply for finance and get it based on the value of the property. But if you are purchasing, lenders will nearly always take the lessor of valuation or contract price.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Depending on what sort of deposit you have you would probably need some sort of council approvals, plans etc drawn up.
You cuold buy the land first and then apply for further finance for the subdivision etc.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Don’t forget the Hart’s case is very different to what I have outlined above. The hart’s used a split loan, with the same lender. The loan was designed to allow interest to capitalise on the investment portion and for all payments to be placed into the home loan portion.
This scenario is different. Both loans for the investment and the LOC (doesn’t have to be a LOC-any loan will do) should probably be with different lenders. There is no real capitalising of interest. The interest for each portion would be paid each month. The investment loan would be IO and would not be increasing. However, the LOC balance will be increasing each month – with the interest for this paid each month – but not the principle.
If you have left over funds, these can be placed into your home loan or, better, into a 100% offset account against your home loan.
Any accountants out there? Coasty Mike et al – what do you think?
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Yes it can be done. But if you want to protect your assets don’t put them into an entity that is trading or employing people. Set up a new one. Maybe your business company/trust can have its shares owned by your property trust.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Why don’t you also send something in writing to the credit department and to the ANZ complaints section so they know why you have left.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Lets not hijack this thread. Please see:
https://www.propertyinvesting.com/forum/topic/17474.htmlTerryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
