With unit trusts the entitlements are fixed. The trust consists of unit holders who own fixed percentages. All profits go to the unit holders in proportion to their holdings. The units could be held by an individual, company or discretionary trust. Unit trusts are generally good for two or more separate parties to go into a venture together as they can have fixed shares of the profits.

Discretionary trusts are trusts where the trustee decides each year who to give the income of the trust to and what amounts. This makes things flexible as one year the trustee may give to a beneficiary who has a low income – each adult can earn up to $16,000 pa tax free. So if you had 2 kids at uni you may be able to have a trust income of $32,000 and pay no tax on it. This is also the best way for asset protection as no one beneficiary has an entitlement of income of the trust – only a mere expectancy. So if a beneficiary goes bankrupt, the trustee would just avoid giving them any income of the trust until they come out of bankruptcy (otherwise it would go to their creditors). This isn't the case with a unit trust as the entitlements are fixed.

No trust can distribute losses, but this was gotten around by a person borrowing to buy income producing units of a unit trust or a hybrid.

Hybrids are a mixed trust with a discretionary component and a discretionary component. The ATO has no problem with them if they are used in a proper commercial manner. The problem is some promotors seemed to be saying A could borrow to buy units but the trustee could give the income to B. the ATO's view is that why would A borrow to buy units if they had no or little chance of getting any income from the trust.

So if you set up the hybrid so that the unit holder has to get the income and captial gains in proportion to the units held then you could probably negative gear with the trust. The trouble with this is no asset protection and no flexibility. However, it still may be worth considering as the trust could redeem the units later on and the trust will become a full discreitonary trust without needing to change the ownership and paying stamp duty. But CGT would be applicable on the transfer of the units.

Strictly speaking there is no guarantee a trustee will ever distribute to a particular beneficiary. So if you build up a large asset base in the trust and guarantee the loans you will have a large debt by no guarantee of income (if you did have a guaranteed income stream from the trust there would be no asset protection).

But in practice banks generally will consider the trust income, even other trusts beside the one borrowing, as your own if you control the trust.

1. You need to convey it by filling in a transfer form and paying stamp duty – if applicable.
2. Yes. You will have to pay out the existing loan.
3. You will need to change the loan because the ownership is changing. Both names will need to go on the new loan.
4. Yes, but you may need approval of the FIRB.

What you will need to do is to tell your bank you want to change the loan and transfer title by adding your partner. The partner will probably need to supply proof of income if she has income. You will then need to talk to a conveyancer or work out how to do the transfer yourself. The new loan will pay out the old loan at settlement.

You should also work out the stamp duty implications for your state too.

Also consider using less cash may mean you have more cash for your PPOR loan or offset account saving you non deductible interest too

Duckster, do you reckon you would get a 6 month one?

One thing to consider when choosing which name is asset protection. Who is more likely to get sued? Possibly a Nurse could be sued for a negligent mistake – Although it may be a remote possibility it is still possible. Depending on what you do it may be better to have the house in your name.

But you also must be careful about whose money goes to pay the mortgage on this house. Even though it may be in your name, if sued, it could be argued that your wife has an interest in it, especially if she was paying the mortgage, You could be her trustee in effect. Having the house in one name may not protect the other person 100%, but it would be a great deterrent and it may be unlikely the creditors would pursue it any further.

Jointly going on loans also adds risk. If something happens and you can't pay both of your credit files will look bad.

It may also work out better for long term borrowing capability to start getting loans in one name only. No sense in wasting borrowing power by jointly going on loans.

Also since you may be renting out the existing PPOR in the future i would immediately stop paying any extra off the loan. Change it to IO and pay excess cash in the offset account. This will make you future tax deductions much larger and save you heaps of tax.

It would depend on the deal. With some deals all you would do is secure the property and later sell the option for a higher amount.

If there are development applications involved, then it may be different.
 

I would suggest you immediately stop paying extra into the loan and try to switch to a IO loan with a 100% offset account. Pay the min and put the rest in the offset.

When you get the new PPOR I suggest you do the same as you never know when you will move out of that one and rent it.

The buyers agent would no doubt charge a fee on the securing of the option. In General the Buyers agents charge for finding the property for the buyer and are not paid a commission by the seller.

Why type in capital letters?