Hi Carlin

I don't know anything about super. I know there are concessions, but to sell the IP you would have to pay CGT (which I think can be offset by making a deductible contribution into super), but then you say you have to pay 15% tax when you put the money into super.

If you had a trust you could distribute to yourself and still do all the above. But if your situation  was such that your brother had a capital loss for a business which he had been carrying forward for 10 years without any hope of using it, then you may be able to distribute all the CG to him and pay absolutely no CGT. Then you can decide if you want to put the money into super (where it will be locked away) or do something else.

Trusts give flexibility.

If your loan is fully approved and you have signed all documents and sent them back, then your bank should be ready to settle within a few days – although they usually want to allow around 10 days.

If your solicitor is back, then there should be no problem as long as the other party agrees.

There can be delays over Christmas, but pushing things out to Feb is a bit much. Maybe it is your solicitor that is going on holidays until this period? I would just instruct the solicitor (your their boss!) to ask the other party to settle when you want. Ask them to do it in writing. The vendor's bank should be able to settle in a few days of being notified – unless the other party has the property cross collateralised and they need further valuations etc.

It shouldn't have any effect on your broker, and your solicitor should have the same amount of work either way, so I am not sure why they can't settle – but you have agreed to 8 weeks, so it is up to the other party.

Jason

ask your accountant. You have to be careful if you live with your wife!

never

Hi Daniel

The deductibility of interest depends on what the funds borrowed are used for. So if you take out a LOC and use part of it as deposit on an IP, the interest on this portion would be claimable. But if you then took some money for a holiday, then the interest on this wouldn't be claimable. If you have one LOC and mix it like this it would be very messy at tax time and you would be hurting yourself financially if you paid off part of the principle as this would need to go towards both portions of the loan in proportion. ie, you cannot chose to pay off the loan for the holiday first.

A way around this is to have 2 LOCs, one for personal expenses and one for investments.

It doesn't matter what the loan is secured by. Whatever property has equity will do – this doesn't affect deductibility at all.

Living off equity means you can borrow money to live off tax free – but the downside is you will have interest accumulating which you cannot claim. A partial way around this is to live on your rents and other money and to borrow for all investment expenses where possible. This may make at least part of the drawdown deductible.

It depends on how much tax you can save.

If you add up all the interest and depreciation etc and then work out what the loss will be, you then can work out how much tax you would be saving. These days with low interest rates it will be a lot less viable, but if your loan is still high then you may have a large loss and large tax savings.

You then need to work out if all the hassle of moving and then having someone else live in your 'home' is worth this saving.

Yes you can change the name of the company pretty easily by filling in the ASIC forms from http://www.asic.gov.au. If your trust already owns property, then it may be a bit complex as you will have title deeds issued in the current name.

Before you buy you should seek good tax advice. Your trust should still be able to function as a discretionary trust or you could still issue units, but it would depend on the wording of the deed. If it allows the trustee to give the income to someone other than the unit holder, it may not be a commercially viable transaction and the ATO may disallow the interest claim.

Hi Linar

I think that living off equity was only a minor component of those 2 companies with the major aim being to buy as many properties as quick as possible and then to wait for the growth to kick in.

There was another financial planner, Steve Navra, who was a big fan of LOE and he used to say you should only access up to 80% of the growth after it happens – so in times like now where there is no or little growth, there should be no draw down for living expenses.

Things should get easier with finance once this financial crisis is over. Might be a while though.

Hi Carlin

Some good points, but for me I would only ever buy in a trust.

Re low risk of being sued – you can get into trouble easily. eg. one of my clients has recently gotten into trouble because of credit cards. she is now bankrupt. This is because of stupidity, but it was unplanned (naturally) and is unable to be planned for.

If you wish to sell properties in the future, you may save a lot of CGT by using a trust. Along the way you may also save income tax.

When you die you can also pass the control of the trust to your children without any stamp duty or CGT payable. This can even be done before you die if you want to bring your kids into  your investments.

Another advantage is if  your get into some credit problems and can no longer get finance – you can just change the director of your trustee company to your brother (eg) who can then go on to get finance – and possibly access equity.

So why not use a trust if all you are up for is a bit of accounting fees and some more land tax?