It is a difficult concept to grasp at first.

With a discretionary trust no beneficiary has any interest in the trust property. So if a beneficiary is sued the trust property is not able to be touched.

Under the Bankruptcy Act property held as trustee is also not considered the property of the individual so this is not able to be touched if the trustee is individually sued.

However, if the trustee is sued in their capacity as trustee then the assets of the trust are at risk. So if a tenant injures themselves and the property owner is negligent then the tenant will sue the trustee (the trust) and if the trustee has no other assets then the property of the trust will be at risk. Changing trustees in this case will not help.

There is also section127 of the Corporations Act which provieds that a director may be personally liable for a trustee debt in some circumstances.

When you change trustee of a trust there is generally no stamp duty payable, or just a nominal sum.

Ian

Not recognised for loans maybe, but for other matters they would be. Such as operating accounts etc.

The trouble with loans is if the attorney signs certain documents then there are privacy issues such as releasing information of the donor which will be seen by the attorney and the attorney making declarations for the donor which they don't know are true. It is also their money so they can make the rules regarding this.

Technically I don't think the interest would be deductible.

You have borrowed money and invested them into a savings account. This is not a commercial transaction and you couldn't justify the deduction of interest here.

Once in the savings account the funds are savings, no longer borrowed.

You could trace the funds to the savings account and then to the item for which they were used. But you have mixed it with other cash as well (see Domjan's case re this). So even if you could argue this, you would have to apportion the interest. The cash in the savings account was low so it would be a small portion of the account that was for private use.

However, having written all this, I had a friend who did and does the same thing. He was audited by the ATO and they didn't even pick it up or mention it.

Not as simple as that Nimby. You can move the debt, but the tax deductiblity stays the same. what you have to do is to structure your affairs so you can pay your non deductible debt quick while letting the deductible increase – capitalising interest, borrowing to pay interest etc. But this needs careful planning.

Thats how I understood it.

And the answer is that you will probably not find a lender willing to do this. I think St George used to, but not any more as far as I know.

And did you take the $45k directly from the home loan to the OSR, or did you move the money to a savings/cheque account first?

You cannot settle while there is a caveat in place.

I am an answerer!

nope

see s30 Duties Act
http://www.austlii.edu.au/au/legis/nsw/consol_act/da199793/s30.html