There are a few promoters out there promoting this sort of thing – but none of them lawyers from what I can see.

How do you gift equity is what I would like to know. You can let a trustee take a second mortgage over your property, but a mortgage is only security for something – usually for borrowing money. So if you lend money to a trust that money is always your money and still available for creditors. If the arrangement is non commercial then the bankruptcy act has provisions which can unwind any such transaction.

There may be other ways to structure which are cheaper and more effective about 5 years after they are set up

I think your $20k may be better spent. Sell your property and spend the proceeds – if you are really worried. Then start again afresh structuring well from the get go.

I would suggest you consider to buy under friend's name only. You can set up structures which will cost money and result in cashflow issues or just keep it simple. Joint names would mean you on title too – that may be possible or may not considering your debts. If it won't hold you back then both names, if it will then friend only with you assisting. You can then have an agreement drawn up so as to split expenses and profits.

Yes that is correct. Prior year capital losses could offset capital gains – with the same person. You should seek advice though to make sure your losses are captial and have been carried forward.

By capacity, I meant mental capacity.

There are plenty of ways your mum could lose her money, so to protect her and yourself you each should see separate lawyers and nut this out. It is doable but should be done properly as there are so many issues involved.

Several

1. You could end up with a mixed purpose loan = messy and more tax

2. If you ever moved out and rented the property it would be hard to work out how much interest you could claim. Could be a high loan still with no interest deductible.

3. higher rates on LOC too

Make sure the loan is secured or mum could lose her money. You also have to consider capacity issues because of her age and be careful of 'elder abuse' allegations – possibly by other family members. You and her should have separate solicitors and she should instruct her solicitor directly without your involvment.

She should make sure her will is up to date and that the money is appropriately left to the persons she wants to give it to. A testamentary trust would be worth considering – both you and mum (separately of course).

I was going to write "i would strongly recommend against this set up" but then seen you want to use the LOC for business later on.

In this case I would only suggest this if you are able to fully pay off the LOC before using it for any business related purposes.

I think a better way would be to set up a PI loan with a 100% offset. Pay minimum and then before you start the business then pay down the loan and apply for a LOC. This will give you flexibilty if you don't go ahead and won't cause any adverse tax issues. Your property would also have grown in value and you could get more LOC possibly.

Jimmy,

If it is semi-detached then it may be possible to live in the entire property for a short period. then move out and rent it and use the temporary absence provisions to have the whole property free from CGT for up to 6 years. Depends on many things though so seek tax advice.

You have to distinguish between you and the SMSF. If you purchase a property similar principles apply, but I assume you meant if the SMSF purchases a property and if the rent is $1600 and costs per month, including interest is $1200 then there will be a profit of $400 per month taxed at 15% in the fund. But don't forget there may be non cash deducctions such as depreciation and loan costs, so the taxable profit may be much lower. If the profit is negative, i.e. a loss then this loss can be used to negative gear other income of the fund such as your 9.25% employer contribution. so instead of that being taxed at 15% on entry there may be no tax

The offset works like this:

$200,000 loan with $50,000 in offset = interesst payable only on $150,000 of the loan.

Maybe i misinterpreted your post, but If you buy in a SMSF the rent cannot be used to pay down your PPOR. Rent received by the SMSF belongs to the SMSF and you can only access your super money once you meet a condition of release.