Well they are the owners of the property – this can’t be undone. There may be ways to minimise future effects though.

Convert the existing LOC into a term loan and set up a new LOC. If you are worrried – do them in separate applications, with the new LOC after the approval of the conversion.

Sounds like she would fail the control test – s1207v(2) Social Security Act
And the source test s1207v(3)

http://www.austlii.edu.au/au/legis/cth/consol_act/ssa1991186/s1207v.html

So that would mean the trust assets would be attributed to mum s 1208E

The trust property would also be subject to CGT and land tax possibly.

Have you considered other strategies such as buying in her name, perhaps tenants in common with a family member – 99/1 maybe. That would prevent dealings and mum’s share could be left to the trustee of a discretionary testamentary trust under her will. This would provide greater tax benefits and more asset protection (in certain aspects)

Costs me about $500 or so for the ASIC fee I think. But you also need insurance, credit ombudsman membership etc

What is the source of the money in the first trust?

It can be done, but it depends.

But another thing is – if it can be done, that doesn’t mean it is a good idea.

I would have done it differently.

If there is no income then no expenses could be deductible – basic tax law s8-1. If she pays under market rent then expenses claimable would be limited to the amount of rent paid.

Pension issues – you are related to your mum so she will be deemed to control the trust. The trust assets may be assessed as if they are her own. Also if she was the source of the trust money in any way this could effect things too – maybe even if you were the source.

Why are you structuring like this? Considered alternatives such as Trust lending Mum to buy?

Yes there would be issues – a non resident trust would be taxed differently to a resident trust. Residency may be decided on where the trustee is located and/or where the central management and control is. Also a company must have at least 1 resident director.

I don’t know much about this area, but Paul at PFI would.

Connective is the best. I was with them, left, but have now gone back.

First timer wrote:

Then in a years time move into the IP and claim the LMI as taxable debt on the old PPOR?
Thanks again

You can do that, but would the LMI be deductible? I don’t think so because it was incurred because you increased the loan to buy a new PPOR – a private expense.

However, You might be able to argue that the LMI relates to the whole loan and at least part of it will be deductible.

Borrow any extra $80k from the PPOR as a separate split.
Use your cash as deposit to avoid LMI if possible
Borrow 80% of the new property, IO with 100% offset

Quickly convert the existing loant o IO with offset if you can.

Until you move keep all cash in the offset of the existing home.
Once you move take your cash with you to the new home and its offset.

Use separate banks if you can.

And consider timing – when to move, considering land tax if applicable.

When you move out of the old one get a valuation done as this could be the new cost base.
No valuation needed for the new one when you move in, but keep a record of all expenses while you are living there as that can be used to reduce CGT when you sell.

Plenty of tax and legal issues here. You should seek specific legal advice.

firstly does the trustee have the power to allow a beneficiary or a relative of a beneficiary to live there? If so can this power extend to under market value rent? (if you are a beneficiary she probably is too).

Does the trustee have a loan on the property? Would they be claiming interest or other expenses, if so the interest and other expenses would not be deductible if under market value rent is charged. Deductions may be limited to the rent received – your accountant or tax agent can cover this.

How will the trust pay for any short fall of expenses over income?

Lease in place? Should it be a lease or a right to occupy? If a lease what about the legal requirements for a bond.

What happens if you die?

What about disputes – how will these be handled?

What if you lose control of the trust?

Centrelink issues too perhaps.

it might be better if she pays market value rent and you could gift her some money separately.