Hi

I think that is a good question that more people should ask themselves.

I think you will need to do some calculations and see how much interest you would save annually if you were to pay off your PPOR loan. Then, If you sell the investment you will probably need to purchase another one to keep your investment going. So you will need to work out the buying and selling costs and the CGT see how the figures compare.

To keep costs down maybe you could sell the IP to a trust you set up – no agents fees needed. But bear in mind trusts cannot distribute losses.

You could argue with the lender that the valuation was low or maybe try another bank. But I guess the other party wouldn't want to pay above market value.

Are you aware that you can access your super for an emergency such as being behind on your home loan repayments? Talk to your superfund about it.

McNorman

That book is a bit old now I think. Tax laws change rapidly too. I haven't read the book (but would like to)am not sure, but I haven't heard anything like this before. I know that is a provision for acerages whereby the land surrounding the house can be classed as part of the main residence for up to 5 acres – but I had always assumed it had to be one parcel of land, ie one title. Maybe this isn't the case?

Hi Meld

The advantage with a company is that it is a separate legal entity, so that if the business is sued, it is the company that goes down – not the shareholders or directors (unless acting illegally).

Another advantage is that it is a separate entity for tax purposes. The company can retain profits and be taxed at 30% max, and/or it can pay wages to directors, or employees, or contractors. Profits can also be distributed as dividends.

So what this all means is that you can pay yourself and your husband equal amounts up to the point where you would pay more than 30% tax. Instead of having one person earning more and paying a higher tax percentage it will work out cheaper if split evenly. You can also work out how much you have to earn before you are paying 31%+ tax – then it is best to leave it in the company, maybe.

If you are setting up your own company it is best to have only one director. This is for risk reasons. If the company folds, it is the director that takes the heat – which may be an adverse credit report or maybe being sued for something they did which was in breach of some unknown law.

Have one person as the fall guy and the other person as the asset holder. If the  guy is sued it is best if they have no assets. The family law court will still be able to divide things fairly – it doesn't matter whose name.

Also consider having the shares of the company owned by a family trust – maybe with the -risk person acting as trustee. This will help in the future with tax minimisation as well as protection from creditors in the unlikely event that the non-risk person is sued.

I don't think that there are any books which explain this sort of thing in easily understood terms. Probably look at some websites such as accountant/law firms. one good one is http://www.lawcentral.com.au and http://www.taxlawyer.com.au . The best book on trusts for the lay person is Dale Gatherum Goss' Trust Magic.

BTW, many if not most accountants do not have an understanding of trusts and often company law and taxation. It maybe a good idea to ask at least 2 for their opinion and do some research yourself.

I am not sure if it would be a good idea to buy in your company name as your company would have to pay stamp duty and CGT on any profit, even if transfered to yourselves.

It is probably best to buy in your own name(s) for the first one and then form a discretionary trust for subsequent ones. A trading company should never buy assets as these will be at risk if the company gets into trouble.

LOCs are completely different to IO plus offset as there is only one account. Any deposit in the LOC will be a repayment and any withdraw will be new borrowings. So if you have your pay paid into a LOC that is deductible and then take it out again for expenses then you will be rapidly decreasing the deductible balance. You could end up with a loan similar to the original amount – but without the ability to claim any of the interest.

A LOC should only be used to access equity and for investment purposes – eg deposits on further properties, paying other rental property expenses etc.

Hi Scott

This is a complex area, which I don't know much about, but wouldn't you just pay tax in England under their rules and under the double tax agreement the Australian ATO would not tax you on your overseas properties again?

You can only have one PPOR – except for a provision for 6 month overlap.

IO loans stay at the same balance throughout the loan. An offset account is a totally separate account to the loan. Any money in the offset account saves you the same amount of interest as if it were deposited directly into the loan account but it is still totally separate from the loan. So any money going into and out of the offset will still leave the loan balance the same.

Interest on $42,000 is only about $3780 per year. If you had $25,000 in a offset account you would save $2250, so it may be worth setting up, even though it is a small loan. Depending on the value, you may also want to set up a LOC at the same time, taking the total loan to over $250,000 and maybe even getting a discount on the rates – and have the LOC for future investment purposes.

Don't want to make you worry, but if you are locked into a contract and your finance falls through, you could be in trouble. You should always not go unconditional until you finance is fully approved.