Hi Banker

All valid points. But what about the major downsides of CC?
such as
1) bank may have more security than needed
2) bank may have a choice on which property to repossess
3) bank may not release security for a sale if remaining security is not enough
4) harder to untangle when more properties come along
5) harder to refinance into another lender if need be (eg hit borrowing capacity)

This is called cloning or trust splitting.

It used to be possible, but then the ATO abolished the general CGT exemption. Though it may still be possible in some circumstances.

see TR 2006/4
http://law.ato.gov.au/atolaw/view.htm?docid=TXR/TR20064/NAT/ATO/00001

And http://www.ato.gov.au/taxprofessionals/content.asp?doc=/Content/00109677.htm

Westpac and ING used to. up to about 85%.

Rudi

You would have to talk to a bank over there. Australian banks wouldn't be able to take it as security – except maybe aussie banks operating in the UK

try bankwest

I don't beleive there is any benefit in cross collateralising and many problems with it. Of course there are plenty of benefits to the bank – they can get more security than they need and tie the client up further making it harder to leave.

The only possible time I would suggest it is if there are a few properties each with a little bit of equity. Even then it would probably still be better to have 2 x $10,000 loans as opposed to 1 x $20,000 loan.

As to bankers points.
1. I am not sure why CC would save you proving your incomes??? If this would apply to CC why not to stand alone?

2. Having 10 loans as opposed to one loan would save on the statements and internet banking time, but does this really matter? It would complicate things at tax time as the interest would need to be apportioned between properties.

Also what would happen if you had one big loan and sold one property? How much of the loan do you pay down?

3. If all your loans were with different banks you would need 5 applications, but if 2 or more where with the one bank then you could also use 1 application. If you don't like applying for loans this could be a benefit, but it is only minor.

I can see many more benefits it avoiding CC.

It takes time for the concept of trusts to sink in, so go slow. I am still learning after using and studying about them for 10 years.

try http://www.lawcentral.com.au and http://www.taxlawyer.com.au for info and the book http://www.trustmagic.com.au

The major disadvantages are:
– Losses in a trust are quarantined – ie you cannot use a trust loss to offset your personal income
– No Land tax threshold in NSW.

CGT is a commonwealth tax – same in every state. There is no rate, but the CG is worked out and added to your other income. So if you have no income it could be low (depending on how big the gain is). Max will be the top tax rate if you are already earning about $130,000 pa income. If you held the asset for 12 months it would get the 50% discount, so max 23% approx. plus medicare.

Discretionary trusts also offer significant tax flexibility and can make borrowing more flexible as well. Also are estate planning benefits.

There are many advantages to using a trust and a few disadvantages. I think it best to do some research and weigh up the options.