I just got a client 1% discount on $1.2million loan with a major bank.

A caveat really doesn't offer much protection. It is not like a mortgage. However it will stop further dealings with the property – so it cannot be mortgaged or sold while a caveat is in place. The caveat is notice to 'the world' that you have an interest in the property.

Whether this interest is protected if the owner went bankrupt – I am not so sure. It would be very messy with the creditors likely to be applying for the sale of the property etc to satisfy their judgment. Could be a legal mess.

Probably your friend should have by-passed the agent and dealt with the vendor directly. They may have been able to get out of the contract with the agent because of a breach of the terms – could have saved some commission.

I would suggest you keep all money in the home loan and reborrow the $300,000 using a separate loan. This should be IO. Use this for the new purchase and the interest should be deductible. Keep paying the minimum on this loan and the other investment loan (should be IO too) and pour all exess money into your home loan until it is paid off.

There are 2 issues here. 1 is the ownership and the other is the loan.

By adding someone to title the ownership of the property is changing. Therefore the loan will need to be done again.

Should be able to claim all costs i believe. Search on the ATO legal database for "steele" – a case on this area which lead to a TR by the ATO.

or maybe the broker is promoting non bank lenders who don't offer offset accounts.

The other person is basically renting your 50% of the house. You should be getting rent for your share and can offset the expenses for your share.
So it should be deductible – check with your accountant.
 

Look at a discretionary trust

Hi Luke

I think the law is very clear on this. Trusts are separate entities for taxation purposes and therefore if a trust incurs a loss it cannot be used to offset income of another entity such as  you. eg. If you make a profit and your wife makes a loss they cannot cancel each out.

Some were of the view that certain trusts can enable negative gearing. But this was achieved in a round about way and worked like this:

Trust buys a property and units are issued.
Person A borrows to buy the units of the trust.
The unit holder received an income from the trust
If the income is less than the interest the loss can be used to offset other income of person A

So the trust is not negative gearing, it is the person buy units in the trust.

Hybrid and unit trusts are still able to do this. But the wording of the deed is very important in determining tax deductibility. See the recent Tax Determination from the ATO: TD  2009/17