Yes, I know about setting up trusts. It is extremely complex – what do you want to know specifically.

Just the legal obligations alone could fill up a book – the trust must act in the best interests of the beneficiaries, cannot profit from the trust at the expense of the beneficiaries, must account to the beneficiaries. The beneficaries have the right to inspect the financials of the trust, to be taken into account for distributions and to lodge a caveat over trust property etc etc.

Cost to set up from $200 to $10,000. Stamp duty is $500+ in nsw, but may be nil in other states.

A brdiging visa holder can set up a trust, but there may be tax consequences depending on whether the person is a resident for tax purposes.

Never lend anyone money!

Every day the money is in there it is saving you interest. not much maybe, but it still helps.

Yes they can take both or either.

Even if you don't cross them they can eventually get the other one, but it takes longer.

The main reason not to cross is the loss of flexibility.

say you had two properties crossed, securing one loan. Both had dropped in value so you decide to sell one. The bank can say  to you that they will only release the sold property if you pay down the loan on the remain property by $x. If the one you had sold has dropped you may not have the cash to pay down the loan. This happened to a colleague of mine.

If they were not crossed you woudn't have the problem because the bank would not need to value the remaining property.

Your existing loan is separate, so that won't change.

The LOC will have a limit of $120,000 but a balance of nil initially. When you take out $30,000 you will only pay interest on this amount. this would be loan 2 as described above.

The other way is
$320,000 existing loan secured by house.
loan of 105% of the new purchase price secured by this property and your house. ie 2 securities for one loan = cross collateralised loan.

You would want to pay down the non-deductible debt first. This will save you tax,

You would generally have all monies going into the offset and all repayments coming out of this. A variation is to borrow the repayments for the IP loan from the LOC so that your cash stays in your offset saving you interest. This needs careful planning however.

You will build up substanital cash in the offset and then can decide whether to pay this into the PPOR loan and set up a new split and repeat the process.

Do you mean you will not pay the interest on the IO loans, but let them capitalise?

There is a tax ruling which says capitalised interest retains the character of the main loan.

Do you have a separate loan for the equity release? If not you should

If you borrow to invest the interest is generally deductible.
You could set yourself up so that you borrow from the LOC to pay the interest, but this must be done properly or you may find the ATO will disallow it.
You could have your rent paid into your LOC, but why pay down investment debt. Look at putting the rent into an offset attached to your home = saves non deductible itnerest

I would suggest you park the money into a 100% offset account, save interest and then decide what to do. If you decide to buy a PPOR, the cash will be available. If you decide to invest, use as little of it as possible – keeping it for future PPOR.

Yes it is very complex they don't teach about this in law schools.

Everything is up to negotiation. Whether someone exercises an option or not will depend on their estimate of the value. And with property it is not just value that is taken into account but other factors too – emotions.

maybe its better to think with shares
eg ANZ is trading at $20.00 You sell an option for $2 with a strike price of $22 and an expiry in 12 months. You would do this because you think the price may not reach $22 in 12 months. You would also be protecting yourself from a small drop too. Since you received $2 income the price of the shares would need to drop below $18 for you to make a loss.

With shares you will know when the price goes over $22. it may happen in 6 months, but the option owner may hang on as the higher it goes the higher you could sell the option for. Say it went to $24, the option owner bought the option for $2, but could sell it for $4 (or buy the shares for $22) that is a 100% gain. If option owner sells now it may go up to $25 or it may drop, its his call.