hi Richard,

Good question. I am working with structuring and setting up estate plans for people and loans are a big part. There are so many silly brokers out there and so many people are simply throwing their money away by paying too much tax because they haven't got a simple part of it correct. Now I can give tax advice and legal advice and credit advice and SMSF advice, but will leave out the financial advice for now.

Carl, you are throwing money away!

heaps of issues with smsf. You would be unable to stay in it if you purchase in the SMSF. You would also likely to have problems building.

Since you will be owner building and have a bit of equity you might consider buying the land with an 80% LVR loan and then setting up a LOC on the PPOR and using this to complete the build. Once the project is finished yo may be able to increase the loan on it for further investing.

Yes, def don't use a LOC for a standard loan because of the tax issues. If you do you will be left wtih a large loan with none of the interest deductible. Only use a LOC for deposits and other IP costs.

If you have non deductible debt then you should have the offset account on this loan. If you set up a second one on an investment loan you will end up paying more tax.

Hi Ossi

Firstly, you have little equity and virtually none that is usable. But this will come hopefully.

The trouble with 2 on title is 2 on loans. So you and the friend would need to apply for an increase. Both of you incomes etc would need to be proven again. You would both be jointly and severally liable. It could be possible to get the LOC in one name with the other person guaranteeing it. Its a bit messy, but not much can be done about it. Also, if you friend suddenly had bad credit – you could be denied the loan.

So assuming you set a LOC up in both names, you should also do a loan agreement with him lending you half of the money you have taken out. This may not be necessary, but you never know and it could come in handy if audited down the track.

You can also get a new loan and have it stand alone with the existing propert playing no part. ie not used for security in anyway. Even the LOC won't be secured on this property. You could pay the LOC back although for tax reasons it may be better not to.

If you do pay the LOC becareful because he could withdraw or start using it. This could happen at any stage. so maybe request 2 to sign.

I odn't think part IVA could apply unless you were paying interest with further borrowings in a scheme like fashion to enable you to pay down your PPOR loan faster – and even then only maybe.

I am a solicitor with knowledge of trusts and I would like to offer that I have a look at the trust set up for you to see if I can help or make some suggestions.

I would have suggested what Paul suggested, but with him putting up cash that will change things. Maybe just give him a larger percentage by giving more % of units in the unit trust.

Are you going to mortgage these properties to get loans later?

Redrawing funds to reno or use on that property would make the loan deductible when the property is rented out – but you would have expended the funds anyway.

Sharve's post has merit. Especially in VIC where there may be no stamp duty payable.