Hi Eddie

Thanks for that. I agree, but ….

If the trust borrows money from an individual the trust would pay interest and the individual will need to declare this as income. So the net result for the individual is + – = 0 and it is the trust that gets the deductions of interest. This is assuming the interest rate is the same for the person borrowing from the bank and the amount charged to the trust.

If the individual was to borrow at, say, 5% and lend to  the trust at 2% the individual will make a 3% loss and this could enable the individual to lose income and reduce tax. But to be able to claim a loss there must be a commercial prospect of obtaining a profit. With a discretionary trust there is no guarantee any one beneficiary would get a distribution (because it is at the trustee's discretion) so the situation is not commercial and the ATO wouldn't allow the deductions.

What do you think?

Thanks

Every withdrawal from a loan is considered new borrowings – so the deductibility of the interest will depend on what the funds borrowed are used for. If you borrow to fund your new property which you will live in, then the interest will not be deductible.

You need to think outside the square. What can you borrow money for that will be deductible? eg rates for the investment property, strata, insurance etc. This will gradually free up money to be used for reducing the PPOR loan – actually you should never, or rarely, reduce a loan. All loans should be IO with the owner occupied loan having a 100% offset attached. Never need to use a redraw.

Hi

1. Probably a discretionary trust for investments due to the tax benefits and asset protection. But, there are lots of tax consequences if you are a non resident for tax purposes – so get some advice.

2. Yes. Losses cannot be used to offset non trust income.

3. Not sure, you maybe able to get 80% depending on your situation.

4. You will need to do research and then maybe order your own valuation or rely on the lender's valuation

5. If you invest in a trust, or even in your own name and later become a resident I think you should qualify for the FHOG – if it still exists

6. Yes. You could set up a trust with others and invest that way.

7. Vesting means the trust must end. All trust assets will need to be distributed to beneficiaries – there is a law against perpetuities. 

Yes, please look at a SMSF – you could end up in a much better situation – nil tax for starters plus better asset protection.

A contract for the sale of land is not enforceable unless it is exchanged. ie  you must have a contract with their signature on it. But I am not sure if you can enforce it using a faxed copy.

Best to ask your solicitor.

disregarding the personal loan for a moment, these days you will need at least 3 to 5% deposit as genuine savings in addition to the FHOG. Some lenders also know back people whose net asset position is negative. So, i don't like your chances I am afraid.

Depends on the bank.

Most banks just have the offset applied to the interest, so the balance stays the same and the interest varies with the amount in the offset each month.

Other banks, notably St George, do things differently and take any saving off the principle.

If may be difficult to borrow the money in your own name unless you use your own property as security. It is difficult to borrow in your name if the company is the owner as this will be 3rd party lending.

But, assuming you can, and you charge your trust more than you are paying, then you will be making a profit and diverting money out of the trust into your personal income. So you pay more tax

If you charge your trust less, then you probably cannot justify the claiming of interest as it is not commercial – you are making a loss. And if your trust is a discretionary trust there is no guarantee you will get any return from the trust in the form of a distribution so you probably could not claim the interest at all. This is the problem with claiming interest under hybrid trusts.

Even if there is a guarantee it would be virtually worthless. If you have to sue and the company has no assets………….

To be a contract for land it has to have a few details such as price, indentity of the land (like address or maybe name and your name.