Sue

I am not sure. You had best run this by your accountant.

If you are putting the rent into an account, why not use a 100% offset account, at least you will save a few days interest per month.

Terryw
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North Sydney
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Adam, that sounds right with your units. Trusts can’t distribute losses. But they will not always be returning a loss. After a few years the rents will go up etc, and you will be making a taxable profit. Then it would be good if it was a trust. There are also other advantages such as asset protection etc.

With the Hybrid trusts it is a bit different. The loan is in your name, so you personally claim the interest – not the trust. This should leave you trust with a nice profit. From this profit other costs and depreciation are deducted and the net profit is then distrbuted in accordance with the trust deed.

Terryw
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North Sydney
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Say you have a $500,000 loan on your property (worth $1mil) and a $500,000 loan on your IP.

You have your poprerty loan PI, and IO on the investment loan. You also have a LOC set up against your home loan. When interest is due on the investment loan, you can pay this from your LOC. When rates etc are due for the IP, pay these also from your LOC.

The cash you would have used to pay these can go straight into your home loan (or 100% offset account).

Please check with your accountant on the capitalising of interest as if not done correctly, you may not be able to claim the interest on the interest.

You may, eg, need another LOC which you use to pay the interest on the interst of the first IP.

Terryw
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North Sydney
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There are a few companies in Sydney offering Islamic loans. I have written a post here explaining it about 2 years ago. Ican’t now remember how it works, but it was like a lease option where the clients are paying rent to the lender. It works out ot be exactly the same as paying X% in interest and these companies are even required to have comparision interest rates – even tho no ‘interest’ is charged.

Terryw
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North Sydney
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Sarah

I beleive you can still choose between the two. one or the other, not both, can be claim as your PPOR at the same time. It may be better to chose the one with the higher growth. Check with an account before you claim.,

Terryw
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North Sydney
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Not really. The nature of debt cannot be changed. The ATO looks at the purpose of the funds.

You should make sure you have IO for investment and PI for non investment.

You should also look at maybe setting up a LOC to pay for rental expenses – even interest. This will allow you to pay off your home loan earlier.

Terryw
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Mortgage Broker
North Sydney
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Minors cannot enter into contracts and cannot obtain finance.

If you wish to buy a property for your daughter, maybe you hsould look at a Bare Trust. This occurs when you enter into an agreement with your daughter to buy a property with her as beneficial owner and you as the trustee owner. For all legal and taxation purposes she will be the owner, but her name will not appear on title. Any loans would have to be in the trustee’s name.

Once she turns 18, you should be able to transfer the title into her name with only nominal stamp duty.

I am not sure how this will affect the FHOG or the claiming of the PPOR, but I suspect that you could still claim you current home as your main residence and she could claim the new home as her main residence with you renting from yourself – the trustee. There may be tax consequences if she is receiving rental income as a minor though.

So best to talk to a solicitor and accountant.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
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If you don’t use equity, then it will take a very long time to save deposits. Most investors use equity in their homes, and then with growth they keep accessing the increased equity for more properties.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
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I beleive the HUT trust must claim the depreciation against the rental income received in its tax return. Whatever is left over after costs and depreciation is distributed.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
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Just be careful that you don’t get your funds tied up for too long. Things don’t always go to plan and often go over time.

Terryw
Discover Home Loans
Mortgage Broker
North Sydney
[email protected]