An option holder has the right to lodge a caveat on a property.

hi TLP

I would still caution you regarding this. It could be very costly if the broker is incorrect. I would advise you to get some written advice so if you are audited and disallowed you can point out that you relied on the advice and the penalties will be lower. You could also go for a private ruling.

The problem is that the funds are not really borrowed any more if they are in a savings account before use.
 

Why are you taking tax advice from a broker?

In terms of loans, yes it is possible, but in terms of tax deductibility it may or may not destroy your ability to claim the interest on $166,000. Is your broker saying you can  claim the interest? Are they licenced or qualified to provide this advice?

What you are doing may be ok if you never use the offset account to deposit any other funds. If you do use the offset then you will be contaminating the borrowed funds and you will be unable to distinguish which funds you later withdraw – the borrowings or the deposit.

Sounds too risky to me.

see the legal case of FCT v Domjan.

OMG, 10k, I didn't even notice.

Many issues.

You can only claim rent at market rates, transfers are at market rates as are CGT and stamp duty calculations.

You could also buy it now in your name with you are his/her trustee. Later you could transfer it for nominal stamp duty, $20 maybe, and no CGT. This may, may not, cause problems with the loan though.

Also family law issues – what if you or he get divorced and spouses make claims etc.

its hard to get your head around initially. Just think of the trustee as the owner of the property. So all trust property goes in the trustee's name. This includes bank accounts, title deeds etc. On some things, such as bank accounts, but not on land titles, you can also record that the trustee is acting in their capacity as trustee – but this is optional.

I would not use the offset account as that is not borrowings and the interest deduction may be denied. What you would be doing is borrowing to put into an offset, which does not earn interest. Then the money is savings. Once you take it out of the offset account the interest on the loan will go up, but you probably won't be able to claim this portion.

get a relative involved, through a trustee maybe, and then you build for them.

I think there are 2 issues here PJ.

The first is the capital loss. This will be trapped in the company and your company may not have any other capital gains to offset the loss which will mean it ends up wasted. You may be able to use income to offset the loss too – but income of the company not your income. (BTW did your company sell the business or the shares in the company which owns the business?)

The other issue is the guarantee. You may still be able to claim this personally if you are paying the loan of the company. I am not sure about this and it may depend on how it is all set up too, so you had better speak to an accountant.

The house is a totally separate issue. If you buy an investment property it won't change anything regarding the company or the guarantee. You can't just borrow extra and attribute it for the company or its debt. Deductibility will depend on what the borrowed money is spent on and the purpose it was spent.

excellent