Who is purchasing you or both?

Trusts are considered separate entities for tax purposes. So any loss resulting from income will be carried forward but cannot be used to offset anyone else's income.

If a trust sells a property and makes a capital gain then this is different class of income from the income loss which is carried forward. But, the trust deed may permit the reclassification of income. So a CG could be converted into income.

But I am unsure if it could work out that the capital gain could be offset by the income loss.

I am not sure what you mean by the last few sentances – with a trust 'you' don't get any tax deductions, the trust does. also not sure about the last one a trust can get the same deductions as a person can.

Yes the 6 year rule can aplly after you move in and then out again.

So if you live in year 1 and then move out in year 2 then it could be CGT free from up to 6 years.

But if you rent it out for 1 year and then move in for 1 year and out again and rent it then the first 1 year will mean CGT applies but it could be exempt from the subsequent absence and this would probably mean you are only charged CGT on the percentage of the time you were renting it out for the initial period.

eg. you rent for 1 year first then it could be exempt for 6 years so CGT would be 1/7 years = CG x 1/7.

You cannot just decide to pay the CGT in a different financial year. You must pay it in the year the contract was entered into. So if you signed contracts in july 2010 the tax would be part of the financial year of 2010/2011 which would be due about now.

Don't assume finance will be ok as it depends on more than equity. At least approach a broker beforehand. You wouldn't want to waste all your time and energy and costs of checks only to find out there is no chance.

Then get a copy of the contract. See if there is anythin unusual in it. You could start some verbal negotiations and then see a solicitor before making a formal offer. Get your friend to check it out and then use a building inspector too.

No. The property just has to be your main residence and then you move out. The rule relates to being absent from your main residence.

I still don't see how it differs. Remember this scenario is based on an offset account attached to an investment property.

Say the IP has a taxable loss of $5,200.

If he has $50k in the offset then this will save $3,200 pa in interest. So the tax situation for this property will become $2,000 loss

This effectively means his income overall has increased by $3,200. This in turn means tax will increase by his marginal rate x $3,200.

If he had put the $3,200 in the savings account at the same interest rate his loss on the IP would be the same, but his overal income would be increased by $3,200. So he will end up paying $3,200 x marginal tax rate in extra tax.

Its just a commercial decision. Bank would probably sell at market value and make a claim for any shortfall on LMI. LMI will lose out as they couldn't pursue the vendor or previous owner as he is bankrupt. This is what they charge their huge fees for.

Would you rather earn $100 in interest or save $100 in interests on the home loan?

Both would result in the same savings – assuming the same entity is involved.

The $100 interest would be taxable. The $100 in interest saved would mean  you have $100 less in deductions which means your taxable income will increase by $100.

A trust is not a legal entity. So the names on contracts should be that of the trustee. But the ATO treats a trust as an entity for tax purposes so it could be X as trustee for Y.

For insurance it doesn't really matter I think, but you should inform the company that the trustee is acting as trustee – full disclosure. Not sure it would make any dfference though.