hi Mrs Palmer

If you buy and sell properties you are going to have to pay taxes, whether it be income tax or CGT – assuming you are making a profit. A good way to reduce your tax bill is to use a discretionary trust structure. Have a look into these.

You are crazy if you are just taking advice off a forum. Go and see a solicitor before you sign,

What happens if you  don't specify the details of the finance ? The vendor could find you a lender at 20% pa and your could be in trouble.

Hi Johann

Never pay off a property loan. Use a 100% offset account instead.

Once you pay off a loan, especially an investment loan, your money is trapped. What would happen if you wanted to buy a home to live in? You would have used up all your cash and would have to borrow to buy – and pay non deductible interest.

No Doc loans are generally hard to find and have high rates – you will need decent deposits too.

Low Doc loans generally require 2 years ABN these days as well as 1 to 2 years GST registration if your earn more, or declare more than $75,000 pa. ( you would be required to be registered for GST if your turnover is more than this – not profit).

Paying yourself a wage or your 'business' paying you a wage doesn't really help either as you are self employed. They will want 2 years tax returns for both business and personal if you are director of the company. If someone else was director and you received a wage, then you may be ok.

A client told me earlier on, but i didn't believe it until i got the email.

Hi SS

Have a look at the prof package as they waive the monthly fees and give you a discount on the rate. You have to be careful with the loans as if you have a PI loan the monthly repayments are generally fixed, so even if you have heaps of money in the offset, you will be paying the same amount each month and it will be reducing the loan. With the IO loans the monthly payment will just be interest and this will vary depending on how much you have in your offset.

Hi O

That sounds like the way most do it. For tax reasons you will need to apportion the interest between properties – tho overall it should be the same, and it is easy to work out as the loans will be IO so it should be a straight percentage used for each property.

Hi Mr

When you pay down a loan it can be 'dangerous' as the money cannot be withdrawn without tax problems. It is good to save interest, but can hurt at tax time. better to show you by an example.

eg. You have a $200,000 loan on the investment property while you live with your parents. You save like mad and pay this off totally. You may get $10,000 pa in rent, but since you have not interest to deduct, you will be positively geared, ie making a profit. Maybe $8000 per year, assuming $2000 in other costs and no depreciation. If you are on the top rate, then you may pay $4000 in tax.

Now say you go out and buy a property to live in, assume $200,000. All your cash is locked up, so you need to borrow $200,000 to get into this property. You will be paying around $16,000 pa in interest, and this is not deductible because it is an owner occupied property.

So you are paying $4,000 in extra tax and $16,000 in interest = $20,000 pa

Instead of the above, suppose you had a $200,000 interest only loan for your investment and had a 100% offset account attached. You placed all spare income into the offset and nothing into the loan, so eventually you had $200,000 on the loan and $200,000 in the account. You would be paying no interest at all – which is the same as above. Since you are paying no interest, you would be paying around $4,000 in tax on the rental income.

Now, you go out and buy the $200,000 property to live in. Instead of borrowing the lot, you just take it out of your offset account. When you take the money out, you will be paying interest on the full $200,000 loan on the investment again, but this loan is still deductible as the balance hasn't changed. So $16,000 interest on the loan would mean the investment property would mean there is a loss of about $8,000 pa. This may save you $4,000 in tax. So it would cost you $14,000 pa.

The offset method would save you about $6,000 pa.

Hi

1. I think you may be eiligible for the grant, but may not be for the stamp duty exemption

2. You should never pay anything off of an investment loan, but place all money in a offset account. So you save the same interest, but still have your funds available without adverse tax consequences. Once your IP is paid off you will be paying tax on the rent and will need a high loan, which won't be deductible, for the new owner occupied property. A double whammy of pain.