I have looked at this idea before and it doesn’t really appear to be worth doing, unless the place is your temporary home. The reasons being:
– Trust must have other income to offset (unlikely for most people)
– If Unit/hyrbid is used, the ATO doesn’t like it
– May have to pay land tax, where you otherwise wouldn’t
– Must pay CGT if sold (and possibly that NSW exit tax)
– After several years, your rent paid would exceed expenses, the property would become positvely geared and you would be paying more tax where you wouldn’t otherwise had to.

The CG issue is probably the main one. Imagine how much CGT you would have to pay if you purchase for $200K and sold a few years later for $1,000,000.

Terryw
Discover Home Loans
North Sydney
[email protected]

Hi Nathan

It does not necessarily follow that cashflow positive must be older cheaper homes in country areas. It can be done with newer homes in major cities (with growth potenital).

one way to solve a ‘problem’ would be to convert a room into a bedroom. With the right house this could be done on an old or a new property. Adding a room could mean another 30% in rent which could turn a -ve property into +ve.

Terryw
Discover Home Loans
North Sydney
[email protected]

Let us know what happens.

Terryw
Discover Home Loans
North Sydney
[email protected]

I just replied here:
https://www.propertyinvesting.com/forum/topic/18030.html

I am not sure how it works in SA.

Terryw
Discover Home Loans
North Sydney
[email protected]

There is no stamp duty payable for trusts settled in QLD. I am not sure how it works, but maybe all you need is a settlor that is living in QLD?

It would be possible to just copy a trust deed, but keep in mind these are copyright, and they are updated and improved all the time. Also if there is a mistake in the deed and you have used a copy, who could you sue? It is probably not worth it for the small savings.

Terryw
Discover Home Loans
North Sydney
[email protected]

For setting up a charity try http://www.dgr.nsw.gov.au

You need to set up an organisation. a company/trust etc. with a formal document – a governing agreement with what the charity can and can’t do. If it is a trust, you will need 3 natural persons as trustees.

If you are going to fundraise, you must register as this is covered by the Chariable Fundraising Act

You then can apply for various exemptions such as income tax, GST, state taxes and deductible gift recipient status (so people can claim a deduction for gifts) etc.

Terryw
Discover Home Loans
North Sydney
[email protected]

Actually Renton may not understand how Hybrids work going by that quote. It is true that losses cannot be distributed, but it may be possible for the interest to be claimed by the individual rather than the trust. If the trust was receiving income, but without the major expense of interest, it would then be making a profit. The interest would reduce the taxable income of the person claiming it (The unit holder).

Terryw
Discover Home Loans
North Sydney
[email protected]

When borrowing through a company, directors (and sometimes shareholders) will be required to guarrantee the loan. This will come up on your CRAA nearly always.

If you start a new company, the bank will still want guarrantees, and you will usually be required to inform the bank of other loans you have guarranteed personally as well as all personal debt.

However, there are some lenders whose application forms are worded in such a way that you may not be reqired to inform them of other guarrantees. If that is the case then, you could get “away with it”. But it will still show up as a hit on your CRAA and the lender may ask for an explanation.

Terryw
Discover Home Loans
North Sydney
[email protected]

80% of your IP value is $224,000. That means you can borrow an additional $39,000 securred against this property.

To avoid cross collateralising the two loans, you could take an extra loan with your existing lender separate (ie split) to the current loan. Then you could go to another lender, using this as 20% deposit and borrow the rest.

Terryw
Discover Home Loans
North Sydney
[email protected]

Firstly don’t forget trusts. Companies are generally not used to buy property.

If you setup a trust it can buy the back block, maybe for $200,000. The proceeds could then wipe out the remaining mortgage.

The trust will be able to claim the itnerest on the full loan (for tbe back property).

If you use a company, you cannot personally claim any deductions. It may be possible by using a hybrid discretionary trust.

Companies don’t off any asset protection and they do not qualify for the 50% CGT reduction after 12 months. Trusts do.

I am not an accountant, so please get some property advice before acting.

Terryw
Discover Home Loans
North Sydney
[email protected]