Does the government often get 'upset' and not obey their own laws?

Yep.
You have got to put your cash somewhere so you may as well be saving money by using an offset on the investment property. If you had a non deductible loan then you would want to have the offset on this loan, but if you don't then an investment loan is the next best thing.,

Yes, definitely, you should look into setting up a LOC and borrowing to pay any short fall on the investment property, or even the whole cost of the investment property. There is no sense in you using you own cash as that will mean it will take you longer to pay off your own home.

You will need careful advice to set this up and should see a tax expert and get a private ruling or face the risk of the interest claim being disallowed.

Are there any specific pieces of paperwork you have to keep to prove that you were living in the property before a certain date, and then not living in the property after that date?

Nothing specific – the ATO/OSR may audit you and ask you to prove you lived there. It is up to you to show proof such as connections of electricity/phone/internet, change of electoral roll, letters etc. Also changing the electricity to that address may not be enough, there was a case in VIC where he connected the electricity, but the usuage amount showed he didn't live there.

valuation

You can only have one PPOR at any one time, but if you were to get another property later you can change which one you class as the PPOR – and the first could be the main residence up to that point and be CGT exempt.

I think it might be better to get a high LVR loan initially and then put the spare cash in the offset account. This will result in the same interest, (but will cost you LMI). as values grow LMI forked out will become insignificant. It will also keep more cash available for emergencies.

I think there are some bargins out there. my mate sold a property in Whalan recently, 3 bedroom house rented for $290 pw – sold for $210,000 (because of illness). Its a bad area, but i feel that prices have to rise in future because all the surrounding areas are going up so high. Just make sure you get landlord's insurance.

yep, it would be unusual for a bank to give you a copy of the valuation. Sometimes you can get it out of them though.

You should see a broker about borrowing, but as a very rough guide you could get around 5 to 6 times your annual gross income in total loans – but would depend on a lot of variables.. up  to 90% is still possible

Scotts,

Not really. The company is a separate legal entity that doesn't allow distributions to beneficiaries. Any profits would be distributed to shareholders in accordance with the % of shares held. there is no flexibility in distributing money.

But there are ways to get money into the trust.

The first is for the trust to perform some sort of work for the company and for the company to pay the trust a fee for this. This may not be good for asset protection as the trust is engaging in business and could be sued – eg the company could go into liquidation and someone else, not so friendly, could control it and possibly sue for breaches of contract or mistakes made etc.

Another way is for the trust to own some or all of the shares of the company. This way the profit would flow into the trust. But if you have an existing business then there may be CGT and stamp duty on the transfer of shares.

A third way would be for the trust to run the actual business. There would be a company acting as trustee and legal owner, but it would be the trust that is the true owner in the tax sense. Any profits would go straight into the trust. This could be a separate trust than the property to make asset protection stronger or the same trust (if business fails you would very likely lose the property).

Hope that helps – but check the tax aspects with your accountant first as there are many other issues to consider.

oh, and one property doubled in value within a year too!

I believe so – but this may need to be apportioned over the total time. eg if you sell within 12 months and live in it 6 months of this time then it was an IP for 50% of the time you held it so you may only be able to claim 50%.

Also borrowing costs (such as LMI and app fees etc) are not capital costs and can be claimed against income over 5 years.