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Viewing 20 posts - 1,401 through 1,420 (of 16,319 total)
  • Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    They were never one to go to other than for their fixed rates.

    But it is nasty isn’t it. Many people would be stuck and unable to move from them now because of tightening serviceability assessments

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
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    If you accidently used some of the money in the offset for personal items then the loan used to fund the offset would be mixed = part borrowed for investment and part for the private expenses. Easy to do as after a while you will forget what the offset account is in fact borrowed money. There is also a weakening of the nexus between borrowing and investing. You may borrowi n Spe 2015, but not use the money until Dec 2015 – or 2017 even.

    With my method you borrow directly when needed

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    Needs to do the impossible it sounds like!

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    I think you are confusing unit holders and trustees. If the unit holders are the trustees then there is no trust under trust law. Unit holders and trustees cannot be the same – an impossibility.

    If you were the trustee then you would have a duty to hand over trust documents and books to the new trustee. How can you claim the receipts in your own tax returns?

    Seek proper legal advice.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
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    @terryw
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    Post Count: 16,213

    and, even though you may just need $100k now it may still be wise to borrow $300,000 as it will not cost you any extra monney in interest and you will have the facility there if you need it. These days it is getting increasingly difficult to borrow like this so get it while you can.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    I am a tax lawyer and broker and licenced to advise on credit, tax and law and my advice is not to do it like this. They are suggesting you borrow $300,000 and park it in the offset account and later use it to invest. This is where the $300,000 comes from.

    The problems with this are
    1. You are borrowing now yet detouring and not investing directly
    2. You could easily polute the borrowed money and look deductibility of the full interest – and create a mixed purpose loan.

    A better way to structure things would be to use the IO loan, the $300,000 like a LOC. You can borrow and deposit into the offset and then deposit back into the loan, minus say $200 so the loan doesn’t close down. Then when you find a new property to buy you can pay the 10% straight from this loan account, without any detours, and then you can be sure the interest will be deductible.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    Any removal of funds from redraw will be new borrowings and deductibility will depend on how those funds are used.

    You can’t do what you are proposing. But you may be able to borrow to pay for rates, strata etc associate with the property.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    I think your understanding is lacking.

    A transfer is not enough, it must be a transfer at full market value with the purchaser borrowing to buy. Otherwise the interest will not be deductible to the purchaser. Transfer will not be deemed to be done at market value other than for stamp duty calculations.

    Loans must add up to the relevant interests to be deductible. Deductibility depends on purpose and use of funds.

    You need both tax and legal advice.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
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    @terryw
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    Post Count: 16,213

    Legal Tip 15: An issue with mixed purpose loans where both portions are investment.

    Tax law time.

    Most readers will know the dangers of mixing loans – partial used for investment and partial for private purposes. But there is also a potential problem with mixing 2 or more investment purposes in the one loan account.

    An example of a problem with mixing loan purposes.

    Tom has a $500,000 investment loan which was used to buy 123 Smith St.

    Later he taps into the equity of this property and borrows another $400,000 also secured against 123 Smith St and he buys 456 Jones St. His broker tells him to take the $400,000 by just increasing the $500,000 loan to $900,000. “It’s all deductible after all”.

    The interest on the loan will be added once per month and comes in one amount so Tom needs to apportion it between Smith St and Jones St when he does his tax return. This is easy to do. Smith is 5/9 x the interest incurred and Jones is 4/9 x the interest incurred.

    Great Tom thinks I am saving $9 per month in account keeping fees by having 1 loan instead of 2.

    Later Tom sells Jones Street and receives a large sum of money. The $400,000 loan is not secured by Jones St so there is no compulsion to repay the loan. Tom thinks he can keep it open and still claim the interest – but he cannot because there is no income associated with that interest he incurs. So after seeking advice Tom decides he will use $400,000 cash to repay the loan. (doesn’t matter if he does this at settlement of after).

    Tom plunks $400,000 into the loan and thinks it is all done with. He has paid off the debt associated with the $400k borrowed to use as the deposit for Jones St. A year later he is audited and the ATO deny the claim on interest of the $500,000 loan. Why!

    Because the original loan is a mixed purpose loan. There are 2 sub loans in the one loan and they are no segregated. So when Tom deposits $400,000 it must come off the 2 portions of the loan in an amount related to their portion.

    $400,000 x 4/9 = $177,777 (i.e. the $400k loan is 4/9ths of the total $900k loan)

    $400,000 x 5/9= $222,222

    $177,777 of the deposit will come off the $400,000 portion and $222,222 will come off the $500,000 portion.

    Imagine you have a bottle with milk and orange juice mixed. If you withdraw say 400ml you cannot choose to withdraw just milk as the solution is mixed. Same thing applies here.

    Going forward Tom will have a loan balance of $500,000 but will only be able to claim the interest on $277,778 of this loan.

    Tom’s desire to save $9 per month has cost him dearly. $222.222 x 5% =$11,111 in lost deductions each year. If he is on the 47% tax rate this would be approx. $5,222 in lost cash per year for the life he owns the property.

    Imagine if you have $5,222 extra you could use to pay off your non deductible home loan each year. Imagine the compounding effect.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    Many questions

    You should ideally have different loans for the 2 equity loan. Other wise you will have a mixed purpose loan. This won’t be a big deal as both portions are deductible, but there would be issues if the owners of the new property are not in the same names and % as the equity loans. Another issue arises when one of your properties is sold.

    Don’t cross collateralise. Get a new broker too.

    Yes you can borrow to pay stamp duty and all associated costs. And like Lauriek says don’t mix business and pleasure by using the equity loan for any private expenses no matter how brief.

    I will copy one of my articles below about mixed purpose loans.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    I have seen spouses who have transferred for no consideration. Result is a large loan with very little deductible.

    Tax and legal advice is essential, Part IVA tax act considerations too.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    A SMSF can do a sub-division one way with borrowings – through a unit trust with one or more unrelated parties with the SMSF not controlling the trust.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    If you borrow to acquire property the interest will generally be deductible if that property is available for rent.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    The first thing you have to understand is a business is not a separate legal entity or tax entity so registering a name will make no difference.

    Cattleya – many errors
    Company tax is 30%
    Land tax is state based. A company owning land in NSW will get a threshold of $432k if not acting as trustee.
    Not sure what you mean about if you want the cash.
    Directors liable for company debts in many cases. Worse case is director loses personal assets.
    Your comments about claiming things are potentially dangerous.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    I am so glad I got into Steve US passive income fund. The profits are great, but it’s the regular updates and educational insights Steve very generously shares have been the highlight. He makes property investing fun!
    Also I have family over in the US and hopefully I can take the kids to see some of the fund’s commercial property and claim part of trip as a tax deduction.

    Wouldn’t be deductible though – especially expenses for the kids.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Its a question of fact. If queried you will have to prove you have lived there as your main residence.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Sounds like what you are doing is working fine. you should be able to ‘retire’ very soon, if not now.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    3. Try a lawyer for this as it is legal advice – Corporations Act. Tax agents can only advise on the tax aspects.
    You will find the asic fee for setting up a company is something like $465 – plus the time for the advice and the administrative set up costs. Do you know the legal consequences of being a director of a company, how to structure a company, shareholder structure, land tax issues etc.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Hi JJ – thanks for your message – I don’t take on these sorts of matters sorry.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Get legal advice.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

Viewing 20 posts - 1,401 through 1,420 (of 16,319 total)