Actually there are no licencing issues with this sort of thing if you can keep a narrow focus. Property advice is unregulated. You will need a licence to sell or rent or act as a buyers agent, but not do do similar to what Steve McKnight does. Structure advice is legal advice so you could not advise on what names on titles or the tax implications. You couldn’t advise on loans without a credit licence. An AFSL or financial planning licence is only needed if giving advice on financial products – shares or super or insurance basically.

Chattaway wrote:

Put another way I have been figuring from what i’ve read (obviously wrong!) that you’d work it out like this
Interest paid $16000 but tax deductible and therefore 31.5% of $16000 is $5040 – I therefore recieve back $5040Property management $1200 but tax deductible and therefore 31.5% of $1200 is $378
Where is my logic failing me :(

What about the rental income you are earning?

You add up all the costs and then deduct this from the rent. If there is a loss this means you are negatively geared. If positive you are postively geared.

Logan wrote:

Thanks Terry I’m learning a lot from you.
Just to clarify on no.3.Do I determine the commercial rate as it is a personal loan ? Because it would be a different rate to what is being charged on the LOC.I’m assuming that I wouldn’t need the paperwork & also charge myself the commercial rate if it was purchased under personal name?

You have to consider what the security would be for the loan. If the trustee is going to offer you a 1st mortgage then no reason why you would not offer similar rates to a bank. If it is an unsecured loan then a commercial rate may be a higher rate. But you would not want it too high as you are diverting income from the trust to yourself. You should get both legal and tax advice.

If you were using the LOC yourself then there is no lending from yourself to yourself but you have already borrowed from a bank and can then use these funds to invest. If you do it properly the interest should be deductible.

1. Yes, if you borrowed to buy.
2. no
3. yes. You would have to lend the trustee the money. loan would need to be at a commercial rate if you want to claim the interest.
4. not enough info, but can be a good way to proceed. But there may be better methods.

Boshy888 wrote:

Thanks Richard. Its with a solicitor and I am not sure if that is secure enough.

Solicitor rules mean it must be locked up in a safe. You would also be covered by the solicitor’s insurance.
So it would be pretty safe.

PK Grover wrote:

Thanks Terry. If I decide to carry forward the negative income (loss), do I need to complete any paperwork with ATO in advance for next year’s tax return? Will there be a special tax return form for reporting negative income (loss) to ATO?
By the way, I didn’t know that my wife’s income could be diverted to me. Could you please elaborate on it or direct me to someone who could inform me as to how it can be done.
Once again, thanks for your help

Speak to your tax advisor about your situation and see if there is something you can contract with your wife to do so you receive income and she is able to claim it.

Rather than purchasing a rental property why not consider a purchase an owner occupied property and then borrow to invest.

don’t forget stamp duty and you will be taxed as income with no 50% CGT discount even if held more than 12 months since exchange.

You also need to be able to settle in case you cannot find a buyer.

Or to put it another way, Bruno’s accountant almost cost him $56,000 on top of his other fees.