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Thanks Scott, will be giving them a call on Monday.
Joe, I live in Maribyrnong.
Thanks I'll look them up.
The land was previously the government explosives and chemical site and while I understand tests would have been done prior to releasing the land I have a few sick family members all getting ill at the same time. I could just be paranoid but it's better safe then sorry.
Terryw wrote:Thats about it.
If the trust buys a property that is negative geared it will need a cash injection to continue to operate. A gift or further loans.
Thanks Terry – but what about protection, I have been reading this thread with interest:
https://www.propertyinvesting.com/forums/getting-technical/finance/4331681A few months ago I thought this all was a piece of cake …
Dan42 wrote:No, they can carry forward until used up.Thanks!
Terryw wrote:I think it is possible to claim the interest – but you will be receiving interest from the trust so these will cancel each other out. The net result is the trust gets the deduction.
There is no real way around this as the interest you pay on the LOC will only be deductible if you are using the money borrowed for investment/business purposes. If you are onlending without charging interest, or charging a lower interest rate than you are paying then it is not commerically viable and the ATO would disallow it.
So you're saying:
1. Obtain a LOC from lender
2. Loan amount to trust at the same or higher rateHow is this going to work if the IP that the loan acquires is negatively cashed flowed? It won't have enough money to service the loan to myself (and this is not taking into account the loan required to acquire the IP).
Dan42 wrote:On your first point. With a family trust, the losses stay in the trust. Over time, as rents increase, the property will eventually become cash flow positive. The losses in prior years are offset against future years income.
Second point – I don't think that is your only option, but I'll leave that to someone more qualified.
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Thanks Dan. Is there a time frame in which the losses can be offset against future income?
Hi Terry,
Helpful as always!
Correct when I am doing my calculations I am hoping to claim a personal tax deduction on the LOC interest as well as the home loan for the IP – but I don't believe it can be possible with a trust from what I've read.
Thanks
Hi guys, just want to piggy back on this thread as my question is in relation to a LOC and tax deductibility. I have been reading much on using equity to finance loans to acquire further investment properties and being able to claim tax deductions on your personal income for the interest accumulated on both the LOC and new loan.
This is all great until you want to protect your assets and think long term by using a trust, in this case a discretionary/family trust. There doesn't seem to be any way of being able to claim for tax deductions on any of the interest that is paid if used in this structure and hence I can't see how it can be used for long term sustainability – you're going to hit a wall very quickly if you can't claim the loses no matter how much equity you have. In those situations I can only see one way out which is to use the property as security and say you have completely paid off the initial property, you'll be opening up multiple loans for IPs using this one house as security meaning you will end up cross collaterising the portfolio.
Am I missing something?
Absolutely awesome tip Richard – much appreciated. Never thought of doing it that way.
Thanks for this thread, it has some good info.
Can I ask how a LOC would work if the situation is this:
– My parents own our PPoR under their name and the bank loan is also under their name
– We have been working together to pay off our PPoR (there is only a small percentage that is unpaid at this stage)
– Now I wish to use some of the equity in our PPoR and obtain a LOC with my bank, the CBA (which is different from their loan bank)How would this work? I spoke briefly with a loan manager but at the time and she said it would be fine but I was not really clear on LOCs – well I'm not much better at this stage. I am mainly concerned about security as obviously I don't want to risk our PPoR that we have worked so hard to pay for.
Thanks for the prompt reply Dan, clears it right up.
I was going to start another thread but my question relates to this one so here I go. I am a little confused on conflicting information I have obtained regarding negative gearing and trusts, namely unit trusts.
In Tony Melvin and Ed Chan's book "How to legally reduce your tax" they claim you can use a unit trust and as an income unit holder you can claim negative gear loses. An accountant I went to also said the same thing but then other sources I have read, including this forum have suggested that loses are trapped in a trust (all trusts .. except perhaps a hybrid one which I don't want use).
I guess my only choice now is to go to another accountant and also talk to a financial advisor but I would like to hear from others on this forum about this too.
Thanks,
Tony
