A discretionary trust is one where the trustee can choose which beneficiaries to distribute the profit too, ie they have discretion. This is good for a number of reasons the main 2 being tax and asset protection. Tax can be minimised by distributing to the beneficiaries with the lowest income so the least tax is paid. Asset protection is gained because the assets of the trust don't belong to the beneficiaries unless a distribution is declared. So if one of the family were to go bankrupt you would just not distribute to them at all.

Compare this to a unit trust where each unit holder holds a fixed percentage of the trust in the form of units. each year profit must be distributed in accordance with percentage ownership. Units are also at risk if you go bankrupt.

Family trusts are usually discretionary trusts. It doesn't matter what a trust is called, what matters is how the deed is worded.

What you are talking about with the company is the company will probably be acting as trustee for the trust. that means the company will be the legal owner of the property of the trust for the benefit of the beneficiaries.
This adds to the asset protection side – trustees can be used. eg. your trust owns a property and a tenant is electrocuted, They will sue the owner of the house which is the trustee. a $2 company and the assets of the trust are at risk, but not usually the people behind the trust..

The company won't, or shouldn't, do anything else. no business, just act as trustee and file a nil tax return. All the income goes to the trust and this is distributed and the trust pays no  tax, but the individuals receiving the distribution do.

yes, some can, just make sure your accountant knows this area as not all do

I think the big banks are bastards (!), but would rarely use anyone but one of the biggies. I would never use a mortgage manager, building societies are ok, though they can be inflexible because they are small.

If a lender goes under then you shouldn't worry too much as you have their money, not the other way around. What will happen is that someone else will take over your loan. Rates can suddenly increase and this has happened in the past.

Sometimes the small non-bank lenders offer better rates than the banks – but remember the banks can discount and it is often better to pay more for the flexibility and other services offered.

Non-bank lenders are often high with exit fees and there are various other fees along the way – legals, valuations etc. Usually the banks just have this included in one upfront fee – or annual package fee.

5. yes
6. yes, though the non-bank lenders will usually have all of their loans mortgage insured, even with low LVRs, so this adds more requirements you must meet and this can hurt your long term ability to borrow because there are only 2 major mortgage insurance companies.

I agree with RIchard.

Your rate is a bit high. Your loans should both be IO and also you may want to consider breaking that fixed loan. Having that means you have less cash to go into your offset account so you are paying more interest on the PPOR. You may also get a tax deduction on the break fees so it may be wise to work out what it will cost you to break and how much this will end up saving you.

Remember with every payment on PI loan you are paying down the principle and this is less money available for your future PPOR which means higher interest which is not deductible.

Probably be best to borrow as much as possible as once you have the loan in place it cannot be increased to access equity.

Just think of the company as a person. Add up all your income and minus all of your expenses (the tax deductible ones anyway) and then minus other costs such as depreciation and that is your profit. This is then taxed at 30%.

Capital gains are not income until they are realised. So you don't pay until you sell. Also companies do not get the 50% discount on assets help over 12 months so it is not a good idea to hold property in a company as you would have less tax as an individual. Look at using discretionary trusts instead of a company.

zimby wrote:

lol a post 6 years later

what do you mean?

Hi

Sounds like a good job. Yes you can use the equity in the first property to buy the second, and third, and 4th etc.

Also did you know you can continue to claim the first property as your main residence, even though you are not living in it, for up to 6 years and it will be CGT exempt.

Property valued at $100,000 1 year ago. Now valued at $110,000

The growth would be $10,000 so annual growth would be 10% ($10,000/$100,000)

But don't forget these figures for annual growth no not include improvements done to a property, so they can be misleading. eg. in the above property the owner could have put in a $20,000 pool and a $5,000 kitchen so it may really be negative growth

Marriage is the main one, that I have found.

Another major factor to think of is bankruptcy.