A trust is a relationship where A owns something for B.

A is the legal owner but B is the real owner.

Just think of a bank account for kids. Kids cannot operate bank accounts so the parent opens an account as trustee for the kid. The parent's name is on the account but the money belongs to the kid. The income from the account belongs to the kid and should go on their tax return (they won't have to lodge one unless they earn more than a certain amount). The parent is the trustee and the kid is the beneficiary.

Simply put that is what a trust is.

There are many different types of trust with one of hte main ones being a discretionary. This is one where the Trustee can give the income to a wide class of beneficiaries at the discretion of the trustee. This is great because the trustee can give to the beneficiaries with the lowest income first and this will reduce the tax payable.

It is also good because the beneficiaries don't own the trust property or the income (until a distribution), so if a beneficiary goes bankrupt the trust assets are not up for grabs. The trustee wouldn't give them any income either or the creditors may get their hands on that. They would then give to them again once they come out of bankruptcy.

Thats the quick version of what a trust is.

Fred

anyone can pay GST. if you were to purchase a new house GST would be included in the price – same as if you were to buy a car or TV etc. Personal or company don't matter.

Hi John

in Regards to 1. The asset is not yours. It belongs to the trust which means all the beneficiaries of the trust. The trustee has a ficiary obligation to act in the best interests of the beneficiaries so you cannot use this funds as if they are your own because technically they are not. So you have to be careful if borrowing money from the trust or the trust letting you use its property etc. If the trustee is a company you need to be extra careful about borrowing money or the ATO may deem it a dividend payment.

I should add, it you borrow against Perth the interest on the extra funds borrowed will only be deductible if they are used for an investment purpose. Same with LMI. What you are proposing above seems like you want to borrow to buy a place to live in so the interest and LMI wouldn't be deductible.

Deductibility depends on ownership and you can't can't that on an existing property. If you are thinking about the new one it won't matter whose name or what percentage it is in as you can't claim it if you will live in it – but it may be important if you more out later.

hi John

80 Years is a long time and it will probably be your grandkids getting the property then. When the trust must vest or wind up the trustee distributes the trust assets to the beneficiaries. At present some states would be stamp duty free, not sure about CGT it would probably be payable though. Remember taxes/stamp duties etc are likely to change before the time comes. The beneficiaries then own it outright and can do as they please with  the asset.

This law, called the law against perpetuities, is designed to prevent rich families from locking up assets long term over many generations.

JUst think of your trust as a third person. Lets call him X. If X has a loss you can't claim it against your income. Its his to keep until he can make a profit. But you could lend him the money or gift him money to keep him afloat until the profit comes in.

yeah, makes sense.

Just be sure you organise a special interest in advance loan – it is not just a matter of dumping in 12 months of repayments to an existing loan.

You would need to transfer (sell) to the trust = stamp duty, legals, loan fees etc.

CGT = Capital Gains Tax

Maybe you could minimise this by selling one per tax year.

Try to work out what it would cost you in interest if you got a loan to build the new home, and then work out the CGT – it may be cheaper to keep the properties and pay non-deductible interest on your home, live cheaply and repay the loan as quick as you can. Rents should continuously increase on your rentals so the process will gradually speed up.

Also beware that building and selling may still attract tax even if living in the place if you are doing it in a business like manner.

Is the 1.2 Million loan deductible? (eg you may have used it to buy the shares).

If it isn't I would consider selling the shares and paying this down to $1. Then reborrowing it so that all the interest would be deductible if you used it to purchase investments.

From there you can consider what sort of investment.

As for strategy, I think you should look at property with growth potential as close ot cashflow positive as possible and shares with high yields and potential

Have a look at this strategy:
http://www.somersoft.com/forums/showthread.php?t=34046

It is one of the best i have heard of. Depending on your needs you could implement something similar and probably retire very soon.

What is the LVR?

if it is in a major city you might be able to get up to 70% LVR. Rates are 10%+