A call option is one which gives you the right, but not obligation, to buy something.

A put option is one which gives you an obligation to sell if the other party exercises their option.

These used to be used as a way of locking someone into a purchase, but giving them the ability to onsell without have to pay stamp duty, by assigning their option to a new purchaser who would settle. But this 'loophole' has been closed by most states now – in NSW the Duties Act was amended many years ago to make stamp duty payable by the middle man as well as the final purchaser.

Hi

Sounds like you want to release equity from the investment properties????

To transfer existing properties into a trust it is basically the same as selling them to the trust. So you will have all the costs associated with a sale and all the costs associated with a purchase – except maybe real estate agent commissions. GCT will apply (if there was any gain!). Loans will need to be paid out and re-applied for. Stamp duty etc.

It still maybe worth while. You probably shouldn't do both properties in the same financial year as you may end up paying more tax.

You mention dividends – but trusts don't have dividends. Trusts have distributions – and these don't have to go to the trustees, but to the beneficiaries – usually at the discretion of the trustee, which means lowest taxed usually receive first.

You would need a conveyancer – better a solicitor  -to do the transfer. Stamp duty would be payable then, but CGT would be when you do your tax return for that year. You could lend money to the trust to pay for stamp duty, but the CGT is yours! You should see a good accountant about the tax aspects. And your lawyer should tell you about the asset protection aspects.

Not sure what you mean about paying trustees. But if you mean can the trustees receive payment for acting then the answer is yes – if the deed permits it, but this would be income to them. If you mean can the trust payback the trustees for the money borrowed to pay stamp duty and deposit etc, then yes – you should have a loan agreement drawn up for this.

Yes, I can agree with that, but the long term benefits of using a trust may outweigh the short term disadvantages of not being able to claim the losses.

A trust is a separate tax payer. So if there is a loss it cannot be offset against your personal income.

Don't worry too much Jac, we all make mistakes. I have made plenty.

Just remember to try to learn from the mistakes of others as it can save you the hassle.

You generally cannot nominate someone else without stamp duty being paid again – unless, perhaps, if you have a written agreement before the first contract was signed.

I think it would often work out better if you sold. Unless, maybe, you had large sums of cash to use to purchase the new one.

Do some sums and see:
How much tax you will pay on the rent of the old one, and
How much non deductible interest you will pay on the new one.

And then compare this to the sums as if you had sold the old one.

eg if the balance of the card was $1000 and you had used $204.95 of this for investment, then this means 20.94% of the card is investment related. So when you borrow $204.95 from your LOC and pay it into the credit card then only 20.94% of this will come off the investment portion.

However, assuming you pay the card off in full each month, then it may not be such an issue. No interest would be added to the card, so it should be easy to apportion the investment/private balances

So the interest on the money borrowed to refinance the credit card debt may not be fully deductible if you have used that credit card for personal expenses too if you do not pay the card off in full. If you do I think it may be not much of a problem.

In practice if you were audited by the ATO I don't think that would really care to look into it that much as the sums will not be that great.

Long answer is YES.

2. The trust can claim a deduction for the interest.

Just think it thru clearly step by step.

Firstly you and the trust are separate people for tax purposes, say you = A, trust = B

Now if A borrows money and gifts it to B. There interest would not be deductible for A as you cannot claim interest on a gift.

If A borrows and then lends to B. A will be charged interest by the bank. If A then charges B interest at the same rate, or higher, then A should be able to claim the interest charged by his bank. But A will be receiving interest as income from B. So the net affect is A is charged the same as he receives, so no tax. B is paying interest to A on a loan, so B gets to claim this as a deduction, depending on the purpose of the borrowings.

If A were to on lend the money to B with no interest being charged to B, then A could not claim any interest as there is no commercial reason to make a loss like this.

If A were to let his property be used as security for B to borrow directly from the bank, then B should be able to borrow 100% and claim the interest, subject to the purpose of the borrowings.