Hi SR

I just read the whole thread now.

What you have done is increase an existing loan. You will the use part of the loan to invest and will result in a mixed loan. There is nothing wrong with this and the interest will be deductible. If you have a $400,000 loan with $100,000 used for investment then 1/4 of the interest would be deductible.

BUT, problems will arise when you make payments to this loan. Assume you want to pay $1000 extra repayment above the interest. Because it is a split loan then 1/4 of this repayment will need to come off the investment portion and 3/4 off the PPOR portion. This is not ideal as you will be losing tax.

There is a way out though. The ATO will allow the split loan to be refinanced into separate portions, see TR 2002/2 para 18.
http://law.ato.gov.au/atolaw/view.htm?docid=TXR/TR20002/NAT/ATO/00001

Once you do that then get the offset on the PPOR loan A, Loan B will be IO for $100k and loan C new 80% loan for new purchase.

If you qualify as spouses and the property is located in VIC then you may be able to transfer it to your boyfriend without stamp duty and without CGT as it is your main residence.

Your boyfriend could borrow 105% to buy it off you are market rates and this would free up a large amount of cash which could then be used to buy the new house. Net result = large conversion in undeductible debt to deductible debt.

If the property is in NSW you would only be able to transfer it from 1 name to 2 without stamp duty and only if you were going to keep it as your main residence. I think the same applies in QLD.

You would want to save interest on your non-deductible loan before the deductible to increase your tax deductions.

Depends on your risk tolerance.

What about shares/? they are still low and returning good yields. banks shares are returning aroun 7% before franking credits. lots of up potential

Mate, why leave it until the day of exchange?

Some of your questions are minor, such as insurance, but some will have major ramifications for the next 30 years. e.g name on the title. You need to decide this before you enter into the contract. You will need tax and legal advice to properly decide on this issue.

Yes, best to get IO and make sure you have a 100% offset account. Which bank are you going with?
You cannot generally go over 95% LVR, but may be able to capitalise the LMI on top, that is all.
You can pay the deposit via any method unless objected to in the contract. It has to go into the agent’s trust account usually.

Steve,

possibly as you are only refinancing the cc loan with the LOC loan. But to be effective you would have to have only properties expenses on the cc otherwise your payment to the cc would need to be apportioned between the private and investment expenses.

If it is an undervalued transaction then under the bankruptcy act, s120 it could be clawed back for up to 5 years
http://www.austlii.edu.au/au/legis/cth/consol_act/ba1966142/s120.html

If the transfer was done to defeat creditors ie to make the property unavailable to pay creditors then indefinite under s121
http://www.austlii.edu.au/au/legis/cth/consol_act/ba1966142/s121.html

A reason of asset protection would fall under s121 and that is why lawyers don't promote doing things for asset protection.

There is an old case of a barrister who transferred his half of the house to his wife many years ago and then later went bankrupt owing a large tax debt. The ATO was able to get at his half share almost 20 years alter. Cumins is the case.

You should probably see a lawyer asap. Do you see any way out with cashflow? any money expected to come in?

You may have to appoint an administrator to the company.

If you are trading while insolvent then you could be personally liable – the directors could be personally liable.

Hi Johann

Sounds like you are in a bit of trouble.

Are you running this through a company or sole traders?

It sounds like you may not meet the test for solvency as you cannot meet debts when they are due and payable. You should be very careful now that you do not commit any illegal acts such as trading while insolvent.

Do you have any equity in the busniess?

What is the security for the business loan?

Am,

Do you meant the LOC will slowly be used up and the funds available will be diminishing?

That would be the case. But even then there would be no reason to pay down the LOC. You would just want to pay the interest each month. If you do start paying it down you would be diverting cash which you could otherwise use to pay down personal debt = more tax payable.

Since interest is charged monthly i don't see any difference in paying at the end of the fin year or at the begining