one more question:
If i take out a personal loan to pay Stamp Duty then would that be tax deductible as well (i mean interest paid on it).

yes.

ummmmm Martin. Hate to be picky but Serf said $260k (or do you think that was a typo?)

I wouldn’t have a clue about Rocky prices to spot whether there was a typo by Serf or not although $260k and renting for $390 doesn’t sound right either.

The selling REA is no more than a bird dog for the seller – they just happen to be licensed to act as a sales agent. (In some places you also need to be registered to act as a bird dog – check with the appropriate authorities)

The REA gets paid a fee to sell the property. That commission (fee) is secured by written…[Read more]

That, I think, is the prime question here (and with the Div7a issue). How little income back to the unit holder (relative to the amount of CG going elsewhere discretionally) might make the ATO question …..

Irrelevant GP, forget all about the capital gains of…[Read more]

Coast’s advice is good, and as Terry said, don’t forget to factor in the stamp duty on your loan contract.

Another minor charge could be the lender’s loan application fees which are usually non-refundable even if you don’t (need to) proceed with the loan ‘cos the simultaneous settlement you plan on did in fact happen.

And what about…[Read more]

I’ve never heard of Intertax so I can’t report any good/bad news of them.

At 40% I’d probably have my fingers crossed for a failure ! <g>

Just remember that a guarantee is only as good as the mob giving it.

That being the case I’d want to see their financial statements for the past 3 years together with their tax returns (so that I…[Read more]

Sorry, sometimes I appear to be on the soapbox but it’s just my chatty style of writing. It’s as though you were sitting across the table and my verbage is intended for professional clarity, not lecturing.

Besides I’m way too…[Read more]

One thing I’d be interested in your view on, since you have a tax practice, is something Julia brought up on Somersoft.

Then perhaps we should ask Julia to respond? I’m not familiar with her writings and the circumstances behind her comments. However, with that said, let me take your questions as they now stand…[Read more]

I’ve worked in my own tax practice for almost as long as you have been investing. Not to mention the obligatory few years working in another practice before I cut loose and set sail on my own.

It’s been fun but doing and overseeing approx 600…[Read more]

The interest on all the loans you outlined would be tax deductible against the income generated by the property.

The taxman applies what he calls the ‘purpose test’. If the purpose of the borrowing is to generate taxable income then the interest associated with that borrowing IS tax deductible.

You’d need to be careful apportioning the…[Read more]

All in all, ANY loss (property or shares) is best offset against your income.

Ahhhhh, but to achieve that you’d have to demonstrate that you are IN THE BUSINESS, and hence the ‘loss’ is a trading loss.

This can be a two-edged sword. Once you are (successfully)accepted as being in business, you can’t then argue…[Read more]

Jo, sorry to have confused you. As GreatPig correctly picked up my ball and ran with it … all I was saying is that ‘income tax rules’ as opposed to ‘CGT’ rules would apply in Gumshoe’s case.

Assuming there is a gain made, that gain will always be taxed unless it meets the (only) current EXEMPTION rule – that rule being the…[Read more]

What you propose is not ILLEGAL (as Terry said) however as CRJ correctly points out the interest you then pay is not deductible because you don’t meet the ‘purpose test’.

Selling the property to your Trust will trigger Stamp Duty but provided it was your PPOR then it will not trigger CGT.

The trust however would have as its Cost Base…[Read more]

Thank you for the summary on the issue.

One issue that was not mentioned, and one that Gumshoe needs to be careful of, is that of the investor’s intent when the asset (in this case property) was purchased.

In Gumshoe’s case the stated intent is to settle on the land, build a dwelling and then sell it for gain.

This places it…[Read more]

If you will be buying allot of CF+ or neg. geared properties use a corporate…[Read more]

I agree with your sentiments.

I’ve been a CPA long enuff to have experienced 2 or 3 attempts to merge the two bodies – each attempt being thwarted by the CA’s desire to protect the sanctity of their precious Royal Charter.

And yes, we are the larger of the two accounting bodies and that brings with it the advantages you…[Read more]

Thanks for the detailed account – very informative.

I wasn’t having a shot at you btw. I was simply trying to help Sansue evaluate what s/he would want as a return on their money if they were the silent investor instead of the active partner in the deal.

Based on your information such an investor would need in the vicinity of 19% per…[Read more]

Hi Cruiser,

Interestingly the most flexible funds ARE equal. You need to be very careful of being too…[Read more]

Garry, wouldn’t you like a tax deductible trip to Sydney every so often ?

Perhaps your new accountant can only see you on Friday afternoons [biggrin]

or perhaps first thing on a Monday morning that…[Read more]

I know how much I WOULD want to make such an investment, but that is theoretical and somewhat irrelevant.

Let me turn the question around. Let’s assume that the development…[Read more]

What happens in 10 years time when you want to exit your investment? The lessee still has a lease that has up to another 10 years to run.

Therefore you cannot give a buyer vacant possession. This will limit your pool of potential buyers to investors…[Read more]

Why is it that you have 0% equity in your own home? Did you buy, and the market moved backwards that much? or perhaps you owe the usual 20% deposit plus closing costs to your…[Read more]

This exclusion would make the ‘deal’ (in fact ANY deal) extremely +’ve due to the nil interest rate.

As Byronet suggests – factor in a real interest rate.

If your financier IS able to do a 0% loan then all the better.

I wanner believe in the Nil rate loan…[Read more]

Credit card interest rates are still approx 3 times that of a home mortgage. Credit card finance is for those that either fall into their grasp through spending more than they can repay at the end of the month (sorry to be blunt but I suspect this is what…[Read more]

You live in NSW and I’m assuming that your intended IP is also NSW.

As has already been said,

1. the ‘standard’ settlement period in NSW is 42 days
2. it should be their price and your terms, or your price and their terms – exert some control to your advantage.

I would also NOT waive the contract cooling-off period. It gives you time…[Read more]

(paraphrased)

Let’s see, is it possible to achieve the above without being a ‘scrudge’… hmmmm.

What about:
1. attend a morgagor in possession type sale where all the mortgagor is…[Read more]

Over Gordon’s lifetime he’s bought, built and sold more than 50…[Read more]

And watchout, you can’t just setup a LOC and use the money for the trust/company. Loan agreements need to be drawn up so that the interest can be claimed – as they will be different entitites.

If the LOC was set up in their personal names, the action you recommend is good advice.

I would however use the same…[Read more]

I can’t recall seeing it on the newstands.

TD51 of what year?

Just a few thoughts to contemplate:

1. Was the now-expiring lease only for 12 months too? If not it could signal a problem with the dentist as a continuing longterm tenant. I would also use the now shorter lease to buy more cheaply – the premise is no longer prime.
2. How long…[Read more]

On the basis that the company was ONLY going to act as the trustee of the Trust, then I would have the company apply for a ABN. Since it was not trading in its own right then it won’t need a TFN.

Depending on the type of property targetted, you may also need to register the Trust for GST. (ie where you will be…[Read more]

What you are suggesting re: the free rent is caught by the Fringe Benefits rules.This would effectively double the price of the ‘rent’, whereas, say, paying a salary sufficient to cover the net rent would…[Read more]

Agent007’s basic problem is this:

Let’s assume s/he builds up assets of $500k for the trust. Let’s assume too that there is a successful action against the trading company for $1m and there…[Read more]

Money spent in bringing the property ‘up to scratch’ – ie a rentable standard – would be taken into account when determining any capital gains that would be taxable when you eventually dispose of the…[Read more]

You’re right but then you still have to split the interest between the appropriate item numbers in the tax return/s. I would normally recommend the pro-rate approach unless there is good reason NOT to use it.

As you say, if the purpose to which the loan was put was ALL income generating (and hence all the interest deductible) then it doesn’t…[Read more]

I would have said it was Imput Taxed regardless of its subsequent use?

Thanks to all the people that have replied so far. From what I gather is that the ATO has no problem with the Hybrid Trust concept as long as the person who is living in the property which is being negatively geared is not a member of the Family who set up the Hybrid Trust in the first place.

Hang on a…[Read more]

On the topic of Trusts (of varying kinds, how they work, when are they appropriate or not appropriate to use etc etc etc – Yes there are lotsa books and resources you could invest in. But boy o boy, the cost to buy the book/s may be small but then the time it will take you to get a handle on all of the above could be…[Read more]

Judi – Have you thought about an unsecured personal loan (from a mainstream lender) to bridge the gap?

The interest rate could be better than a 2nd and way less hassle.

Getting permission for a 2nd to exist (from the holder of the first)sounds easy but doesn’t always work…[Read more]