Hi All,
Just wanted to get some advice on structuring loans from all you financial guru’s.
First i’ll give you some info about my situation that may help to decide the right way to set up my loans efficiently so that i am not paying too much tax and/or interest.
I currently have about 70k in equity in my PPOP which has a market value of about 170k. My preference is to take out a line of credit on this loan to fund deposits for mutiple IP’s. Any other ideas would be appreciated.
I earn 50k a year and my partner earns about 22k. Given these incomes whose name should we put the loans in to minimise tax, assuming all properties are positive cashflow.
Any advice or other tips that you guys have would be greatly appreciated.
Regards.
Jay
Jay
You don’t mention whether you have children so we will assume they are a possibility.
You have 2 main choices:
1) To purchase the properties as Tenants In Common with 99% share in favour your partner and 1% to yourself. This gives you both necessary asset protection as well as tax effective distribution of income.
2) You consider a Trust structure. Depending on your circumstances (Whether you need the money at the end of each Tax Year) you and your partner maybe the Individual Trustees (A Company Trustee is an alternative) and the beneficiaries will the 2 of you as well any children or relatives.
Whilst we can all give you general advice on this forum we are not fully aware of all the facts and circumstances of your individual situation. Like anything check with your own Accountant before proceeding.
Cheers Richard
[email protected]There is no such thing as a problem.
Just a solution waiting to be foundRichard Taylor | Australia's leading private lender
Hi Richard,
I have 2 children under the age of 4.
Thanks for the advice!
Jay
Jay
Option 2 sounds like the way to go with the 2 children as secondary beneficiaries.
Double check with our Accountant as i am unsure whether you are both employed or self employed or what other write off’s you may have.
Good luck and happy investing.
Cheers Richard
[email protected]There is no such thing as a problem.
Just a solution waiting to be foundRichard Taylor | Australia's leading private lender
Hi Jay,
There are many ways to skin this cat, but assuming that you have minimal other debts and plan to use the money for investment, then yes I think one option is a line of credit where you can draw out the funds as deposits for other IP loans that are independent of your current loan, giving you flexibility for tax, buying and selling property frequently and more loan options. This is also easier to do if the new IP is positive cash flow, the less it hampers your serviceability the better, but with your incomes you could get loans up to 95% no problem, depending on location. The downside is that if you wish to draw greater than 80% of the value of your property ($136K total, ie $36K above your current loan of approx $100K) then you’ll pay lenders mortgage insurance up front even if you don’t draw down the funds for many months.
Another option is to cross-collaterise against your current PPOR loan which will probably have less set up fees than a LOC and allow you to borrow greater amounts while minimising payment of LMI – depends who you bank with of course and how that compares to what’s available.
On the incomes you and your partner are earning you have lots of options re the tax side but remember if it’s cash flow positive it adds to your income, if it’s cash flow negative it deducts from your taxable income.
Good luck!
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Mel
[email protected]Jay,
I purchased “Wealth Guardian” from Steve’s site and it goes through in detail all of your questions.
It does use examples or Case studies to prove the effectiveness but they do stress that advice from your accountant about your own situation is required before proceeding with a purchase.
Each option carries with it “Asset Protection”, “Tax advantages”, “Set-up costs”.
I recommend that you try to get a copy of this as it will at least provide you with the basics of each option.
Good Luck
Milkman
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