not deductible against income. capital costs

Hi Derek

What you have said above doesn’t make sense. A trust cannot be a director, only persons can be directors. A trust doesn’t even have a director, but there may be a company which is a trustee of a trust. A trust cannot hold equity, but a trustee could take a mortgage over other property owned by others.

Not sure how this could leverage…[Read more]

You’ve had advice from everyone except the lawyer. A SMSF can only borrow to acquire a single acquirable asset and the asset must be held on trust while there is a mortgage.

But you are talking about a unit trust being involved. Under reg 13.22C a SMSF can own units in a unit trust under certain condition, one being that there is no mortgage or…[Read more]

You will essentially be lending the buy the 20%. You will need legal advice on the terms of the agreement.

Yep Jamie is right. Simply drawing down a loan doesn’t make the interest deductible. Deductibility depends on what the funds are used for.

It sounds like you want to set up a trust not a trust account.

I am a trust lawyer – ask away.

If it wasn’t you one could buy 50% off the other and borrow to do so and claim the interest once rented out – it could be done with no stamp duty. But it may still be worth doing now – one buy the 50% share of the other so they become the sole owner, you just have to pay stamp duty. At least this allows you to increase deductions and keep the property.

Is the Sydney PPOR in both names?

Sorry to hear about your situation. This sort of thing is fairly common unfortunately.

It can never be moved out to the PPOR loan. If you borrow to buy shares and sell those shares the interest on loan loan will no longer be deductible.

If you had a $100k loan, non deductible, secured by the home you could set up a separate loan of $20k also secured by the loan.

You would then borrow $20k from the above loan and $80k from a new loan secured on the IP = 100% borrowings with no crossing of securities. Interest on both loans will be deductible against the IP income (assuming set…[Read more]

It is unusual to have a loan that capitalises. What is her reason for not paying the interest and was this allowable under the terms of the loan?

La Trobe would be better probably – but she just needs to weigh up the fees and rate.

They are actually breaching the Corporations Act by doing this. You should put them into ASIC to help prevent others falling into the trap.

If you have $500k in super then it would make more sense to set up SMSF – generally. This is because when you look at all the fees in the industry fund they will add up. It may cost less than $2000 pa to run your superfund. But you will have much more control and many more strategies at your disposal. Imagine you were to die now, it would be the…[Read more]

e.g.
$100,000 property value

$50,000 loan, $20k in redraw.
Stay with same lender, keep $50k as loan 1 – set up with offset, don’t pay extra.
Loan 2 with same lender can be another split for $30k. Cancel redraw

Loan 3 is 80% loan on new property with a second or same lender.

Its a bit ridiculous to pay a $5k spotters fee when the broker will get a commission as well. Maybe she should approach Pepper via a broker that doesn’t charge.

No new legislation just comments from APRA to the banks that they are too easy. Things will get tighter. it is effecting many investors.

However there may still be lenders out there that you can service with.

Terrible situation. Not sure why you would want to set it up like this (destiny?). Not only is there the cross coll issue but the tax issue – hope you are not going to make any deposits?

Taking you for a ride (that is going nowhere!)

10% would do. You can also borrow the deposit against existing property – don’t use redraw because of tax reasons.