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Unfortunatelly if i apply commercial interest rates during the year i end up with a loss of around $500 in the trust (meaning i lose out on the ~$500 of franking credits earnt during the year).... you live and learn i guess

Coz in the event interest deduction pushing the trust into a loss position, franking credits are stuck in the trust and are lost....

yep, agreed.... there would be no commercial reason for the person to lend the money so therefore no deduction for interest costs... it more comes down to is allowed to change a loan agreement without paying back the money and then re lending it (as its investments are illiquid)

Trust has the loan from a related party who which is currently charging interest. the related party has borrowed the money from a bank and is effectively the middle man (ie currently recieves interest and pays interest to the bank). What i effectively want to do is "restucture" the loan and make...

Does anyone know if it is it possible for a trust to stop charging interest on a loan where it has previously has been (ie for the first yr of creation it paid interest to the lender but from now on i dont want it to charge interest anymore?) Has anyone completed it with one of there trusts...