Dept fair trading not involved. The EU was entered into by the two companies, Aussie Rob AND AsIC. I dont' know if this could mean AR would be personally liable for refunds though, but it could be possible.

Interesting. Looks like one company maybe under administration because the article mentions an 'insolvency specialist'.

Lifestyle Investor Services Pty Ltd is still operating normally according to an ASIC search.
Lifestyle Trader Pty Ltd is also still operating normally according to an ASIC search
see http://www.search.asic.gov.au/cgi-bin/gns030c

"The business" was sold, according to the article, to Investment Capital Systems.

You could be throwing money away by taking a PI loan.

No, not protected.

You may also wish to consider another option.

Purchase the property in a fixed unit trust and borrow to buy hte units. If done properly the interest on the purchase of units will be deductible against your own personal income. Land tax free thresholds would also apply in NSW.

This is almost the same as buying in your own name, but it adds a great deal of flexibility because later on your trust can redeem the units and then be converted into a discretionary trust. Stamp duty and CGT may apply but the stamp duty may be less than it would in transferring the legal ownership. Added bonus is that tthe trust may be able to borrow to buy the units off you and claim the interest as a tax deduction.

you need good advice on this one.

A trust would work very well if there was a profit straight away.

If there is a loss then it could cost you a bit more than holding in your own name. But this doesn't mean you shouldn't use a trust. You must weight up the benefits.

If you were self employed you could easily direct income into the trust to offset the loss and therefore save personal income tax. If not self employed then it is not as easy.

Also stamp duty would be payable on the transfer to a trust as well as CGT and legals. You would also lose a large amount of asset protection than you would if you had purchased it in the trust initially (clawback provisions of the Bankruptcy Act).

Not really sure what you mean by the income and viability bit.

Firstly, you shouldn't be using cash as a deposit, especially if you have non deductible debt. Ideally you would borrow this deposit from a LOC secured on you rmain residence or other property.

If you are paying $160,000 for it and borrowing the lot plus stamp duty, then say $165,000 (split up of course)

repayments at 7% = $11,550 pa

If you get $170 pw = $8,840 pa

You costs will be:
Interest $11,500
Management, rates etc, say 25% of rent = $2210
Total cash costs = $13,710

So net income is $8,840 – $13,710 = -$4870 This is what it will cost you out of your pocket (approx) before tax.

Then you have the non cash deductions such as depreciation of fittings and building, loan costs etc

This is hard to estimate but could be around $5,000

This would mean your taxable income is -$4870 – $5,000 = Loss of $10,000 (rounded).

Now we can consider the different scenarios

A. Wife

Nil other income, so no tax payable. Her taxable income would – $10,000.
No tax saved

B. you

Assume you are on $50,000 pa, add the loss from the property = new income of $40,000
Tax saved, approx $3,000
Total property cost to you  = $4870 – save saved of $3,000 = $1,870 loss.

C. you and wife
Will vary depending on ownership split

D. Discretionary Trust

No land tax free threshold, so an additional expense of land tax.
Say land is worth $80,000, land tax would be 1.6% x $80,000 = $1280 pa

So new figures would be:
Net income of -$4870 plus – $1280 = $6,150 loss pre tax.

Add non cash deductions of $5,000 and the new total taxable income of hte trust is $11,150
Because the trust has no other income there is no tax saved.
The cost of hold it in a trust is $6,150 compared to $1,870 if in your own name. $4,280 difference pa.

—

As rents rise the losses will diminish and it will be positive cashflow after all expenses and deductions are taken into account. But this could take something like 12 years.

But, then again values could double within a few years and then you would be in trouble if you had the property in your name and you were on a high rate of tax with the wife on nil.

there are also other factors to think of such as asset protection and succession. Trusts are extremely complex too

How could you refinance it to keep it negative???

Would it be neutrally geared before tax?

It depends. If you own it in your own name and have lived in it before renitng it out then it could be CGT exempt. What you do with the money has no bearing on whether CGT is payable.

If I was a motivated seller I would accept whoever signed an unconditional contract first with the price I wanted. I wouldn't care if they were a motivated investor or it would mean going with someone who had just made an offer.

Even if I wasn't motivated, I would still do the same. A sale is only a sale if the contract is exchanged without conditions (or when those conditions are fullfilled). Actually a sale is really only a sale when it settles and the cheques have cleared because some do not settle.