If you have a 50% share then you will get 50% of the income or loss. Same with your mum. So mum will use this loss to offset her other income. You will only be able to use your loss to offset your income.

a friend of mine has just purchased his 2nd positive geared property in Sydney – 15% yield. His other property was positive geared on 100% borrowings from day 1 and it has doubled in value within about a year.

So it is still possible.

Thanks Dan

Dan

What about s 40.65 of the GST Act which states new residential premises are not input taxed. New residential premises is defined in s40.75 as not been previously sold – within 5 years.

If they are not input taxed and not GST free then wouldn't GST apply? Is intention relevant here?

ps I hope not!

Yes, generally this is the case.

The shortfall will be even more when you take into account other costs. If the house is owned by the trust then any loss cannot be used to offset your personal incomes.

However, if you were to by units in a trust (either hybrid unit/discretionary trust of a unit trust) you can borrow to buy these units and claim any loss against personal incomes. But there are many downsides with this such as all the incomes and CG would need to go to the unit holder so there would be no tax flexibility and little asset protection. One possible advantage is the units may be able to be transferred into a superfund later on without stamp duty.

its possible for up to 6 years

You should NEVER had a PI loan on an IP if you still have personal debt – otherwise you are throwing away money.
However, if you have paid off all personal debt, then you could have a PI loan, but I would still suggest you get an IO loan. You can then free up more cash to invest further. You can also pay less which will help cash flow if you ever were to get into trouble. The only exception may be if you are a spender and cannot resist spending your cash – in that cash it may be better to pay down debt.

Theres no need to give reasons. I would just say you want to free up cash for personal expenses. IF your PPOR would become an IP then you will need to change things around – depending on how it is set up, so you may need a new ruling. eg you would no longer want to put cash into an offset against this house and you may also want to borrow to pay this loan from then on too.

It can be worse than that.

Imagine you own 2 properties cross collateralised and values drop. If you tried to sell one it is possible the bank would not release the security unless you paid the loan of the remaining one down to meet LVR requirements.

This happened to a guy I know who went thru a divorce and a heart attack. He couldn't meet repayments and tried to sell one of his properties. Bank said he had to pay $40,000 off the loan of the remaining one or they would not. But if could only get about $5,000 cash out of the sale and had no other money. He ended up going bankrupt.

Yet, if he had no crossed the two properties he would have been right.