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Paul | 09 Feb 2014, 05:14 PM Agree 0
I am looking to refinance my three investment properties in order to make them more tax effective.
The background information on the properties are as following:
Property 1 is held in a Discretionaly Trust with a company trustee (and myself as the director). The trust has significant accumulated income losses, which are increasing year on year
Property 2 is held in a Discretionary Trust with myself as the trustee. The trust has small accumulated income losses which will disappear next year
Property 3 is held in my name. This is negatively gerared against my personal income.
I do not have a home loan or any other loans for personel reasons.
All three properties have interest only loans equating to 50% market value.
What I would like to do, is refinance the properties, whereby the loan on Property 1 was paid out in full and the loans on Properties 2 and 3 were increased to cover this. This would not increase the overall amount that I have borrowed but would a) create an income positive situation for property 1 (as there would be no loan to pay off), which would use up the quarantined losses and b) increase the deductions for property 2, which could be offset against other profit making share income in the same trust and c) increase the decustions for property 3, which would increase my negative gearing against my personal income.
Its a great plan - but is is permissable? To my mind it is, because in all instances, the money is just being used to fund income producing ventures - there is no attempt to fund personal loans or anything like that.
  • Ed Nixon - Trilogy Funding | 12 Feb 2014, 01:55 PM Agree 0
    Hi There,

    You could physically do this yes, but the problem you'll most likely be faced with is that the original usage of the funds has not changed and it is likely the ATO would not allow you to assign and claim the debt against a different income producing asset. You need to run this past your accountant as they would be able to give you formal Tax advice.
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