b0son wrote:
We bought our PPOR in 2004, lived in it for a year, then rented it out and moved interstate.In 2006, we bought a new PPOR interstate, and continued to rent out the IP til 2009 before selling it.So….   should we treat the new house as our PPOR from the day we bought it, or nominate the first house as PPOR until the day it was s…[Read more]

Yes, that is an option. But just don't mix any money with the borrowed money in the offset. Get your accountant's go ahead first.

They could just increase the 1st loan to pay out the second – if there is enough equity etc.

Best to use a company as trustee of a trust to reduce the risk. But this opens up other problems such as increased land tax, losses quarantined and personal guarantees – which will expose your personal assets.But I am not sure there is a better way – unless you can convince him to take all the risk and you guarantee nothing!

It is still possible to 'negative gear' with a hybrid trust – but you will lose all flexibility and the asset protection will be reduced.In the past the hybrids were set up in a way that may have been commercially unviable so the ATO disallowed teh deductions in some instances.You will need specialist advice on this. Also watch out for…[Read more]

Yes, that should be ok.Who knows how many people out there have gotten themselves into trouble (as yet probably undetected).

I think your example would probably pass with the ATO.But what if a person draws down money and temporarily parks it into an offset account and then gets their wages or rents or other money placed into the offset account and then later takes money out of that account don't you think there could be a problem with the deductibility of interest on…[Read more]

in Domjan the person took money from a loan and parked it in a savings or cheque account. They then took the money from the account to invest it in property. The ATO denied the claiming of the interest because the money used to invest wasn't borrowed. It come from a savings account. They essentially borrowed money to invest in a savings…[Read more]

What about the implications of Domjan?

But where would you deposit the money on the draw down of the loan before it is to be used?I too would generally prefer an IO loan with an offset – but only if the money will be all used at settlement.

hi Steve1. Yes losses are trapped in the trust. Losses can be carried forward indefinitely until offset by gains.2. Yes laws have changed in the last few years. Trusts no longer get the land tax free threshold. There are different rules for 'special trusts' – some unit trusts may be classed as special trusts, but this will depend on the terms of…[Read more]

Thanks Banker, I missed that.Sounds like your a good banker if you point that out..If trust4sal has cash to contribute to the trust then this may be at risk for up to 5 years from the date of any future bankruptcy, but may still be a better option than loaning it to the trust. Often when bankrupcty happens little or no checks are done by the…[Read more]

Hi BankerI am not sure what you mean by "You stated you will not be borrowing".Yes, if you lend to a trust then that is an asset to you. But any future capital growth in the trust will be safe if a beneficiary of the trust is sued. Trust could pay back the loan to the individual later on when it can increase the loan.

too late i beleive

Ez, thats how it should be done.Also speak to your tax advisor about how to borrow other investment expenses from your new LOC to free up even more cash to put into your offset and save you even more interest and tax.

Thanks number 8. The original poster did not indicate she/he did have extra cash, but if he did then:The cash should be put into a 100% offset account and not into the LOC or a loan – otherwise there may be tax consequences if you want to take that cash out. Ideally the offset account should be attached to the non-deductible loan (if there is one)…[Read more]

That is not what we are talking about here. We are talking about setting up a LOC on a property. I can't see how what you have written is relevant.Paying money into a loan will have tax consequences. Domjan was about withdrawing money and parking it mixed in an account which already contained money. The result was a break in the chain of the…[Read more]

Protection is a different matter.If you lend money to someone it is still yours – but you may still be able to claim interest. If you gift money it is no longer yours – but you can't claim any interest.

Zan wrote:

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…[Read more]

Zan wrote:
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

I think it is possible to claim the interest – but you will be receiving interest…[Read more]