Zaxon
The voice of reason
- Joined
- 5 August 2011
- Posts
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Getting the money into the trust is the tricky part. The usual methods are a gift or a loan. A gift I don't think would work in this case, since inside the trust it's free money. I don't think gifting the money to a trust counts as something to offset interest payments against.3. your ability to add money to a trust depends upon the trust arrangements
This is what I have in mind. If you are ahead in your mortgage payments, you can do a redraw. A redraw counts as a separate loan from the tax man's POV (so I believe). The bank is happy for you to spend that on a holiday etc, so investing it should be fine.4. but, but, but ur lender may have an alternate view of the transfer of this money away from the individual if the loan arrangements say otherwise.
Yup. I'd pay the interest payments personally. The bank would be none-the-wiser.5. and noting that the interest payments will be coming from the entity as noted on the loan paperwork (see 2 and 4 above)
My understanding, based on discussions I've seen elsewhere, if 100% of a redraw is used for investment purposes (so not mixed purposes), since the redraw acts as a loaned sum used solely for investment, then the interest charged on that redraw should be tax deductible. Of course I could be wrongzax,
a home loan redraw is not the same as a loan taken for income producing purposes - the ATO (or bank) does not care about a home loan redraw, or care where that money goes once in ur pocket. Do what u like with that ....... that interest has never been tax deductable.
Correct. But the ATO treats it as one.A trust is not a legal entity.
The trustee is a company. I believe you can lend money to a trust or a company you control. Whether it's worth it for my purpose, is another matter.The account would need to be in the trustee's name (likely you).
So you'd be lending $$ to yourself in your capacity as trustee?
This is from the ATO website. It speaks to interest on a loan being a deduction when used to buy shares, and that if a loan has a personal and investment part, as long as you can keep the parts separate, the interest on the investment part is deductible. I believe a redraw where 100% of the money is used for investment purposes, would qualify.
View attachment 95392
..... You may have to take out a second mortgage. But I'm not sure of that.
good job mate, u said breast enlargement and not penis enlargement ......difficult in a forum to discuss applicable particulars ... (i used the word business earlier to mean a loan taken for any income producing reasons, rather than any loan taken to buy a house or car or pay for an abortion or breast enlargement)
in ur above post they are NOT talking a redraw but a new loan ...... where some loan money was used to buy shares and the balance used for a breast enlargement.
so,
if talking redraw cash from a home loan (and that cash is then invested in whatever), then that is CASH that was used to invest and so has no interest deduction amount attributable to it from ATO perspective. (it is NOT a loan of any sort that was used to invest - but it was cash money used to invest.
so,
if talking a home loan, the ATO (and lender and legal system) looks at the "purpose" of the loan .... and the purpose of a home loan is to buy a house to live in ...... so none of that interest is tax deductable ..... no matter who else is doing what dodgy scams with their tax returns with interest from their home mortgage.
Let's break that down into two sections. Firstly, let's consider the ATO's requirements of a loan.this bit zax, it is about a NEW loan being done in some form that permits the interest payments to be tax deductions .... and the "purpose" of the loan gets written into the documentation ...... (or rather the loan purpose may not be EXCLUDED by the documents - which is why personal loans can be used to buy shares and u get a tax deduction for interest, but u cannot get a home mortgage and then use that loan to buy shares )
the fact that you are using some personal asset as collateral for the loan doesn’t mean it’s a personal loan.
At least we know what going on in your head. We'll add that to your file.good job mate, u said breast enlargement and not penis enlargement ......
all that therapy u r attending is paying dividends ......
(please do not now say "keep it up")
Let's break that down into two sections. Firstly, let's consider the ATO's requirements of a loan.
Based on my understanding, plus based on Value Collectors comment:
Based on the answer given by the ATO I quoted above:
View attachment 95397
For tax purposes, a loan doesn't need to have a purpose legally written into it to make it acceptable to the ATO. It just needs traceability. For instance, if I did a redraw on my home loan for 50k, that 50k then showed up immediately in my brokerage account, I then buy 50k worth of shares with that money, I've satisfied the conditions set by the ATO as a tax deductible loan.
Your second point, as to the bank not allowing a home loan to be used for investing, I did ask my bank about that. "What if I paid off my loan in full. Could I take a new loan on my existing property, without having any intention of moving house? For example, if I wanted to invest the money?" My bank said it only cares that we can service the loan - high enough wage, and that they have an asset to secure the loan against - the house. Other than that, they didn't seem to care. Notwithstanding I haven't actually put that to the test.
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