Not really correct.

A company is a separate tax entity to a trust. Each is a separate person for tax purposes and has to file its own tax return.

If your company makes $50,000 profit and a trust looses $50,000 from negative gearing, the company income can't offset the loss of the trust with the net result an income of $0.

What will happen is the company has to pay tax of 30% of $50,000 ($15,000) and the trust's loss has to roll over to next year to be offset by any positive income. If none it keeps rolling over.

Companies also cannot distribute income flexibly like you have mentioned. The company would have to employ you to distribute money to you, or you would have to own shares and get a dividend. The same with the kids, but depending on their ages they may be taxed at around 66% on unearned income.

Maybe your company is a trustee of a trust??? This would be different. Your company would only be acting as the legal owner and it is really the trust that is running the business.

if this is the case then it would be dangerous to put the investment property into the same trust as the business. but if you did the loss of the property could be used to offset the income of the business because it is all with the same tax entity.

A better way to do it would be for the trust to own shares of the company with the company operating in its own right (not as trustee). Shareholders generally cannot be sued for actions of the company. So when the company operates, it is run by the husband (keep wife out of it) with a small wage paid to the husband, expenses taken out and then the profit distributed to the trust.

It may even be wise to have a separate trust to own the property and a different one to own the shares. The first trust would make a profit and then this would be distributed to the second one.

Also you should note that adults can earn up to $16,000 pa tax free now and kids around $3,600 pa tax free.

all this needs careful set up – and implementation as there a lots of issues such as family trust elections etc.

in Australia there is no gift tax. So if your mother gifted you $300,000 there would be no tax on this. But there may be other issues such as centrelink benefits, asset protection and there may be better ways to do it from a tax point of view, so you should see a tax advisor.

Also you said the money was your inheritance, and your mum was just holding it – this means your mum is holding it as trustee for you and you are the real owner.

I meant to get a PPOR in your own name. This is the only asset you can get which is virtually GCT free. so you would be giving up a lot of profit to not have one. You can even rent the PPOR and have it CGT. This is why I think everyone should have at least one PPOR.

You could use all of your cash to get this and then to reborrow it. So the interest would be deductible if it is subsequently borrowed and used for investment purposes. You would also have a low loan balance which would mean the repayments would be much cheaper than renting.

It is legal and possible to rent a house from your own trust – but this would not be CGT exempt, nor possibly Land Tax exempt. Itis ok to do in the short term, but over time the rents would increase and your trust may end up paying tax on the rent you pay it – where if it was in your own name there would be none. Interest paid on the loan would be deductible to the trust – and the rent would be income. Also trusts cannot distribute losses.

The bigger the deposit you have the easier it would be to get a loan, but the banks must still make sure you can afford to repay it. They have a legal obligation to. So you will still need to show employment and income. Maybe you could go fulltime just before getting the loan and then change back again.

Never mind, the interest on $30k won't be too much. Just don't pay down any more.

i find it very hard to read capitals, so i only skimmed it.

Did you say you are casual? then how do you plan on getting finance for this?

I would suggest you also look at using a discretionary trust for asset protection and tax flexibility. This will also help with the getting of finance by allowing you to easily add people to guarantee loans if need be,

Maybe buy a PPOR out right, or as high LVR as you can and then reborrow it to invest.

size!

This would generally only be for those trusts with corporate trustee.

redraw = reborrowing.
deposit = repayment

Deductibility depends on the purpose the funds are used for.

ATO may never find out of course. They do sometimes send out questionaires to property owners asking a number of questions including asking if any loans have been increased.

Do you mean you will pay more interest for the loan with the offset? if not it may be worth changing. Your loan should be interest only too.

Do the sums, maybe it is worthwhile putting the money in an ING account in the name of a low income earning spouse if you have one.

Asset protection
Tax flexibility
Estate planning flexibility
Finance flexibility
easy to transfer control without changing title

i think i should have said "wear the losses"

If you are serious about investing then use a trust, even if it may cost you a bit extra in taxes in the early stages as the long term benefits will out weight the short term costs.

Discretionary trusts are the greatest vehicle to own appreciating assets. But they do have some disadvantages in the early stages. If you can get through that hurdle you will be laughing.