And ..... (the cogs are turning) could you also include high growth shares in the portfolio & just draw down as the available margin loans allows? Or does this raise a tax issue again? ie you couldn't ask the trust to pay back more than you 'lent' it in the first place? The amount you receive back from the trusts margin loan has to be < capital input & be sourced from a dividend payment?
Can really see how this works with property & accessing equity via another investment field - again, I love the use of structure!!
I doubt if the trust will ever repay me what it owes me. If it does then I suppose I'll have to accept that some of the ML interest is non-deductible. Obviously I'll make sure that its from of different ML to keep it clean.
EG If the DT has $1M of high yield shares (eg banks,TLS,WES,etc) they will pay it $75K (after grossing up for franking). That $75K gets passed though to me for living expenses. If I need more living expenses, then the DT will repay me a bit of what it owes me.
If the DT has a further $1M of high growth shares then the margin loan LVR is likely to stay at an acceptable level. It also gets (say) $25K divs, which get passed on to me. This initial $2M can be either borrowed from IP drawdowns and/or from personal after tax profits.
Since the trust has a $1M margin loan (@8.5%) it pays $85K interest pa. So the DT actually makes a loss of $10K pa ($75K divs less $85K interest). Somehow (ask an accountant) that loss gets transferred to me, so I pay v. little tax.
In practice, as IP values increase I draw down IP equity (@7.5%), pay off a bit of ML, maybe buy some more shares to get ML LVR back up. The new shares I buy can be either high yielding or high growth depending on whether I feel I want more div income or more equity/growth. The IP drawn down equity is deductible too.
There's a lot of flexibility in the structure, it's self perpetuating, it's fairly efficient, reasonably low volatility and fairly low risk. Ultimately it's a way of capitalising interest using ML.
NB all these figures are hypothetical, do your own spreadsheet.