Are you saying you buy houses for cash by using your LOC? If so, then this is an excellent way. What you can do then is to get a mortgage on the property, release your money back into the LOC and to go again.

If you can buy well, and/or do quick improvements, you may be able to end up with 100% finance. eg buy for $80,000, do up, value comes in at $100,000, the bank lends you $80,000 against this = all your money back for the next one.

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Hi Mike

Can I add a question?

Would it be necessary to get the loan agreement stamped by the office of state revenue? (And pay duty?).

Thanks

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Ask them to give you power of attorney so you can sign on their behalf.

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Hi RAMK

The title would be in the name of the trustee, – trusts aren’t mentioned on title. But the trustee is only the legal owner, not the beneficial owner. If someone is sued, assets properly held in a trust are much safer as they are not the persons personal assets.

If you have a company as trustee, then this usually doesn’t or shouldn’t, hold any assets in its own right. Just in case it is sued. Directors can usually only be sued if they have done something illegal like insolvent trading etc.

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It only becomes your PPOR once you live in it. Therefore if you have rented it out before living in it, you would most likely have to pay CGT for this period.

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Giddo

I beleive that is the case in NSW too. Stamp duty may still apply on the transfer of shares (Except companies formed in VIC?), but this should be much lower.

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Cata

I meant if you owned, say Telstra, shares only. There would be no way the trustee could be sued if their capacity as trustee. However, they could be sued as an individual for other reasons.

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If you have lived in the house before renting out, then you could probably claim it as being your PPOR for the whole time. If rented first, then only could claim from the date of first living in it.

BUT (and there is always a but) you can only have one PPOR at one time. So if you were to ever sell the other house, you could not also claim that was your PPOR for the same period.

ps. I am not an accountant

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Tony,

Not sure what you mean by this.

Carl will be borrowing from his bank and lending money to his trust. The trust will pay him interest. This is income. However Carl has a cost of paying interest, and this will offset the income he receives. Net result is nil for Carl, with the trust claiming the interest.

Carl

Your strategy sounds alright by me – but I am not an accountant.

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From my knowledge:

1) Yes
2) Trustee would have discretion, but to claim a deduction you would have to show that you were investing money with a few of getting an income. If you are not getting any distributions, then the purpose of your investment is in doubt. Not sure if all the mone would have to go to the unit holder though.
3) Not sure
4) Not sure, but the units could possibly be redeemed before the sale, and then the gain could be distributed to any beneficiary
5) Trust could redeem the units, and it would then be a discretionary trust with income being distributed as trustee see fit.
6) Units need to be created at purchase. You will be borrowing money to buy these units.
7) I’ve heard overseas residents pay something like 30%+ tax with no tax free thresholds. A quick check with the ATO site should reveal.
If just buying shares, then no. Shares are not risky in the sense of the owner being sued, but various things can go wrong with a property and the owner could be sued. (eg. tenant dies from faulty electrical wiring which you hooked up)
9) The trustee can be changed, and I beleive the company could be setup later. But this will require loans to be amended, and title deeds changed etc – nominal fees.
10) Your home is your only CGT free asset. Better to keep in in your name I think.
11) For a good accountant based near Sydney, I would recommend Coastymike of this forum. Mike is in Gosford.

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