I htink I recall reading somewhere that tax debts are the only debts that are never forgiven. So I hope you friend has done some good research.

Terryw
Discover Home Loans
North Sydney
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ANZ issued a bulletin last year to all brokers saying that they would be barred if they did a loan for someone intending to wrap! In their bulletin they seemed to confuse wrapping and lease options, suggesting they didn’t really understand the two.

But as Pelican said, it seems if you approach banks directly, sometimes the local branch manager will be able to do loans for wraps. It is a strange situation.

Terryw
Discover Home Loans
North Sydney
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maybe. Yes, you can rent from your familiy trust, and it can claim deduction.

A trust can only negatively gear if it has other income. If there is no other income then the loss cannot be distributed and must just sit there waiting to be offset against future income.

If the person is using a hybrid trust, then they can borrow to buy units in the trust and then offset the interest against their own personal income. But the ATO has put out a ruling which frowns on using a unit trust to hold a home that the trustee is living in. see TR 2002-18 – Income tax home loan unit trust arrangement. I don’t know how they would treat this arangement if it was done thru a hybrid trust.

Terryw
Discover Home Loans
North Sydney
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I think if these new items were an improvement on the old ones they cannot be a repair/replacement and must be classed as improvements. Therefore they must be depreciated – I am not sure if they would be classed as building or fittings tho.

ps not an accountant.

Terryw
Discover Home Loans
North Sydney
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Greg

I haven’t looked into these trusts before, can you really get a 12% return?

Terryw
Discover Home Loans
North Sydney
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As a broker, i see a lot of people who get the shits with their bank and then want to change to another, then a week or so later I see someone else who is with the new bank that the client went to, but they have the shits with this bank and want to change to the one the other guy just left!!! Brokers love these people with the shits as it can mean a lot of new loans.

But i think it is true that they good have their good moments and bad moments.

Terryw
Discover Home Loans
North Sydney
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Pelican

I don’t mean to be picky, but a caveat would not help in the event of foreclosure. It would protect the wrappee by not allowing the property to be subsequently mortgaged, but a bank holding a first mortgage would get first shot at selling the property. the wrappee would get the left overs, if any.

Terryw
Discover Home Loans
North Sydney
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I think is it just like renting, but without a lease. It ofen happens when a purchase is involved as long leases want to be avoided. I think possibly, the agent wants her to sign the contract of sale with a long settlement, with her living in the house paying ‘rent’ until the settlement actually happens. If doing this, she should be careful that she can actually obtain the necessary finance.

Terryw
Discover Home Loans
North Sydney
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I agree that it is a good strategy, but one minor point with your example.

If you PPOR is valued at $200,000, then 80% is $160,000 less your current loan of $100,000 = $60,000 in equity available. I am not sure you understood the equity available is 80% less the current loan on that property, as your example had a $63,000 deposit which was more than the available equity.

Terryw
Discover Home Loans
North Sydney
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The trouble with wrapping it is that you will not get the money to do your renos. You may be able to squeeze a small deposit out of the tenant and get extra monthly repayments which will help you, but you won’t get a large lump sum as you would if you sold it.

The credit problems may not be an issue as these only stay on their record for 5 years.

Terryw
Discover Home Loans
North Sydney
[email protected]