also check out http://www.gatherumgoss.com

Terryw
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Hi

‘business’ is a vague term.

Most people who say business are probably actually sole traders. If you just have a business name, then you are probably a sole trader. This is not an entity. The business is yourself, legally.

But if your business is a company, then this is a separate legal ‘person’.

If this is the case, then your company would earn $80,000 but pay you $60,000. Netprofit of the company would be $20,000. So the company would pay tax on this at 30% – assuming it had no other expenses. It could then lend you some of the left over money to buy a property.

However, there are various rules about borrowing money from your company. So discuss this with your accountant. Depending on your overall income, it may be better to just pay yourself also.

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And for all those DIY Trustees out there, if you are going to add or remove beneficiaries this can be extremely dangerous to your wealth.

In many instances this can cause a resettlement of the trust. If this happens then it is the same as winding up the old trust and creating a new trust. And all the costs of stamp duty and CGT for transfering assets would be incurred.

For more on Resettlements, look at this paper:
http://www.taxlawyers.com.au/Publications/trustacc2.doc

For a very good and easy to understand account of the various roles in a discretionary trust see:
http://www.taxlawyers.com.au/Publications/New/Trustacc1.htm

Terryw
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How to calculate the figure will be included in the terms and conditions of the loan. Ask your lender for a copy of the terms and conditions booklet.

Basically, they will work out 2 loan schedules. One at your fixed rate and one at the rate when you get out of the loan. Any shortfall in interest they would have received would be payable as a break cost.

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There are many things to consider, eg how many trustees? I see a lot with husband and wife as trustees, but I don’t think this is a good idea if you are investing in property as it can lead to each giving a guarrantee. This creates more risk and decreases borrowing capacity.

There is also the ability to name beneficiaries. But why name someone if they will be included anyway as a general beneficiary? Some lenders want guarrantees from all adult people named in the trust deed.

In some cases it is better for a company to be trustee. It is safer from an asset protection POV and also easier if you want to change directors and hence change the guarrantor for the next loans etc.

Sometimes when dealing with solicitors or accoutants, they do not realise the lending issues.

I had an argument with a clients solicitor a while back. The client was trying to buy a property and hide it from his ex spouse. The solicitor suggested he set up a trust with a friend as trustee. They did that, but they did not think about who would guarrantee the loan. The mate didn’t want to do it. The soliticor just told me to tell the lender the client would guarrantee the loan, even though he was not mentioned in the trust. He didn’t realise that no lender would accept this and lend money this way.

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If you are personally trustee, it shouldn’t be a problem. The title will be in your name and the loan will be too. No need to have the loan mention the trust. I assume you have a hybrid, so having the loan in the trust name will defeat what you are trying to achieve anyway.

If you have a company as trustee, it gets a little more complicated. The title is in XX Pty Ltd, but the loan needs to be in your personal name. if this is the case, I have found Macquarie to be the best No Doc lender. 70% LVR on the No Doc or 80% on the Low Doc.

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Probably the two major LMI companies will not allow Low Docs in there areas you are considering. However, there is a no lender out there who claims to be able to do a Low Doc in areas these two LMI companies cannot lend for.

ANZ will also do Low Docs in most areas at up to 60% LVR – but not for companies or trusts.

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Its funny how some bank staff do not know their onw bank’s policies.

Today I had a client who went to their Bank St George, and ws told they didn’t qualify. I did some checks and they qualified easily. strange.

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If you withdraw money to invest in an online account, you will be paying interest at around 7.3% but only getting say 6%, losing 1.3% straight away. But you would also be paying tax on any interest you make.

The ATO could also disallow the deduction of interest on the money borrowed to invest in this savings account because you will be losing money with no hope of a capital gain and therefore profit.

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Sounds almost exactly the same as my set up. Glad you worked it out.

Terryw
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