It will depend on what the $50,000 withdrawal is used for. if it is used for something associated with the property then the interest will be deductible.

There is also another one around this, slower though more effective. According to TD 2008/27 the principles governing the deductibility of compound interest are the same as those governing the deductibility of ordinary interest. This means that if the interest on a loan is deductible then if you compound the interest (ie capitalise it) it will be deductible. Therefore it is possible for you to set up your loans in such a way as to borrow to pay the interest on the IP loan. Best to talk to a good accountant about setting it up and to apply for a private ruling.

I think if may help if you are talk about ownership structures rather than finance strucutres.

Expenses are claimed by the person or entity that owns the property so if you set up a DT it would claim all costs including depreciation etc. One disadvantage is that if there is a loss this loss is trapped within the trust and cannot be used to offset personal income. The trust can still negative gear if it has other income (ie income can be reduced by losses) but if there is no other income the loss can be carried forward until the next year – or until there is a profit to offset it.

Also these structures cannot help you borrow more because lenders will take personal guarantees from the people behind the trust and all loans and guaranteed loans of the entities and people involved will be taken into account.

For flexibility and safety it would be good to have just one property per trust, but it is up to you. This is because If the trust is sued all the assets of the trust would be at risk and having one per trust can help control losses if there are any – eg. keep a loss for a future year rather than use it up on a capital gain. Flexible planning.

And it is not only your own children, but grandchildren, neices and nephews etc too!

each adult can also earn up to $15k tax free pa, so if you have adult kids on maternity leave, at uni etc this can save you a fortune

hi NE

Most people don't use trusts all. They usually just purchase in their own names. There is not much you can do, no structure, which allows you to utilise someone elses loss.

You could gift or lend to the trust so that it has lower loans and more profit – but you will need the cash to do this. This is probably the best way to proceed if you can. Or just accumulate the losses.

I am not sure if income losses of a trust can be used to offset a capital gain. I think it may depend on the wording of the deed so that income can be reclassified, otherwise it probably wouldn't work like that. But, on the other hand, if you had an income loss and then a capital gain the loss would offset the gain. Best to ask an accountant this question.

If you are into property there should be a profit in there somewhere – otherwise there is no point in investing. So I suggest to do some sums and see how much of a loss there will be and how not claiming this loss will affect you. Buying in your own name could mean you can afford an extra property sooner for example.

ps. A good friend of mine purchased in his own name because of the negative gearing deductions. His wife wasn't working and he was on the highest tax bracket. I recommended a trust, but he bought in his own name. 2 years later the property doubled and he sold paying a huge amount of tax while his wife still had no income.

I always thoughty you couldn't apply the main residence CGT exemption to vacant land.

You can only have one house count as your main residence at anyone time – except for a 6 month overlap period. The main residence doesn't have to be the one you are living in, but could be the former one. You can just chose whichever has gone up the most in value.

about 10 years ago they were selling for $115k to $130k. What about now? (for Sydney broadway)

Maybe.
If it was your sole residence, your main residence and was owned in your own name and was less than 5 acres in size and not used for a commercial pupose then probably you could avoid CGT.

A real estate agent lying? No way. never. cannot be!

wow, that is an excellent site. thanks

I can't see how that could work. a pre-approval is not an approval. Even if you had a full approval I can't see how it could work without drawing down the loan