Good work spud

I like bankwest too – you can get a high interest account to hold the cash and a normal transaction account to transfer it etc.

hi Vita

Most trust discretionary deeds are worded in such a way as any company in which the trustee/appointor/named benefiary is an officer holder/director/shareholder etc then that company will be a benefiiary too. You could also name an existing company too if you wanted to.

In Australia there is no gift tax and you could gift a property to a trust but you would incurr stamp duty. You would also then need to pay rent to the trust. PPOR are CGT exempt, but not if held in a trust. So I cannot see the point, unless maybe if you are getting a new PPOR and want to keep the old one as an investment.

After 80 years the trust comes to an end and its assets are transferred to beneficiaries.

Why have 2 trustees? If just doubles the risk and possibly reduces long term borrowing capacity.

It is very easy to change the trustee – you just have a meeting and the appointor appoints the new trustee and the old retires. but if your trust owns property you will have to arrange for the title to be changed and if it has a loan you will have to re-apply again and may have exit/entry fees.

It can also be a way to live off equity and to retire early. ie let loans capitalise and live on rents and dividends.

Goodluck with the ATO

Someone with a few properties with some available equity could very quickly pay off their home loan using this method. Imagine if you had say $50,000 pa in rent coming in from 3 properites and could plough this all into your home loan.

It is a very powerful technique!

You need the trust deed which can cost from $185 up to around $1000.
Company set up costs $412 at asic
Each state may also require you to pay stamp duty on the trust. Was $200 in NSW, but recently went up to $550 I think. QLD was Nil in the past. Not sure about VIC.
If you need some advice it will cost you a bit more on top of all this – and it a good thing to have cause if you set it up wrong you will be in trouble.

On going costs are $212 annual ASIC fee and accounting. The company will need a tax return which should be a nl return and should cost much, and the trust will need a tax return – as well as your own personal ones. The accounting shouldn't really cost that much more than if you put the asset in your own name as there is not really much more involved.

Here is the TD i referred to which says capitalised interest retains its character:
http://law.ato.gov.au/atolaw/view.htm?docid=TXD/TD200827/NAT/ATO/00001
I think it is pretty clear, but the ATO can still apply Part IVA and say you are setting up a scheme to avoid tax, so best to get a rling on the overall setup. ie letting interest capitalise and not applying any income for that asset to this loan but applying it to the PPOR loan or offset account.

Yes. if you get a LOC and use it to purchase an income producing asset and then let the interest capitalise it can be deductible. ie you just let the loan increase, not pay the interest, but still claim it and then use the income from that asset to pay down non-deductible debt – or even better to keep the income in the offset.

You could also set up a LOC and then use this to pay the interest on the investment loan and put all income into your offset – wage and rents.

But you have to be careful and should get a private ruling otherwise the ATO may deem it a scheme to avoid tax.

One potential problem is that over time you will end up dramatically under charging your sister because you will be reluctant to put up the rent. But someone looking after the property properly should outweigh this.