Hi Cazzie

Yes, income from one source can be used to offset a loss from another ,such as a negative geared property if both are held in the trust. Just think of the trust as a separate person for taxation purposes. All their income and expenses are taken into account and then any profits are distributed.

Just be wary of running a business in a trust though. There is no limited liability as there would be in a pty ltd company. So if the trustee is sued their personal assets are potentially up for grabs – as well as the other assets of the trust.

It would be best to have a company as trustee or to have a company operate the business and the shares owned by a trust.

Sam

You can gradually improve your tax position by borrowing to pay your investment loan interest. This will help build deductions while paying off your home loan faster. It is a dangerous strategy so you will need professional advice from a tax advisor.

The is the settlor.

The settlor is the person that hands over the initial thing to the trustee to be held on trust – this is what starts it off. It is usually just $10, but could be anything really.

There are various rules about the settlor not benefiting from the trust – so it should be someone unrelated who will never have the possibility of being a beneficiary. Often it is the lawyer or accountant that takes on this role.

I agree with Disco Stu (Dan). It shouldn't matter for tax deductibility. Just make sure the loans are not joined together – ie keep the two separate, but secured by the one property.

The freed up property could then be used later on to get access to equity for further investing.

you should be able to delay settlement – if you settle the removal of tenants becomes your problem

Thats an idea – plan ahead now, get ABNs etc ready

I think the cashflow argument runs along the lines of you can't live on capital growth now, where you can live on cashflow sooner.

Unless you agree otherwise, the rent will belong to the vendor. You are also generally buying the property at the condition it is on the date of exchange, so if something happens between then and settlement the vendor would generally be liable.

You have to be careful in buying something like this. If he goes bankrupt the creditors may start forcing and investigation of recent sales of his assets and if he sells it too cheaply it could cause you problems – may be unlikely, but still possible.

I think the greatest benefits of a discretionary trust is the flexibility. Once you have purchased assets you cannot cahnge ownership structure without great cost. If you keep on purchasing in your own name you get stuck with the income – it may be small initially, but it will increase over time and is like a tax timb bomb!

If you have a trust you can constantly adjust who the distributions go to. eg. you could get the income one year and the next year form a new company and then distribute income to the company. later on you may have another trading company with a loss, so you could distribute to that company to offset the loss and save you tax etc. This wouldn't be possible if you owned via personal names.