planning on investing

My wife and I are currently living in a our 2 bedroom unit in Hobart.

We bought it for 180k at the start of 2006. Our neighbours have just sold their very similar unit for 200k (settling during July 2007). In the coming years we would like to buy a larger PPOR and rent out the unit.

Neither my wife nor I are likely to be sued professionally. We are each on approx 50k a year.

Are trusts only needed in case of getting sued?

Also does the somersoft piaf tool help if you're planning on having mutilple properties. (also couldnt see a section in the demo version where managed funds or shares would be put in)(anyone using the program recommend it)

This year my wife and I are paying off consumer loans and credit cards, we will be ready to start saving up a deposit for our ppor in January, and will most likely be putting funds into Navra retail each month.

The unit is currently in fixed 5 year loan with ING.

Would an offset be the best loan type for the ppor when we get to that stage?
 
Are trusts only needed in case of getting sued?

No. It is also to distribute income in the most tax advantageous way, especially CG when (if) you sell. IPs become tax positive eventually, and putting it in a family trust, for example, means you can distribute to the family member with the lowest income, and then the rest to a company to cap it at 30%.

Would an offset be the best loan type for the ppor when we get to that stage?

Yes, an IO with offset would be one of the most flexible loans for a PPOR. With an IP the offset isn't as big a deal.
Alex
 
No. It is also to distribute income in the most tax advantageous way, especially CG when (if) you sell. IPs become tax positive eventually, and putting it in a family trust, for example, means you can distribute to the family member with the lowest income, and then the rest to a company to cap it at 30%.

Currently the unit is in my name only (which would become a rental), the ppor would be in both names. Would it only be subsequent IP's to place in trust structures?


Yes, an IO with offset would be one of the most flexible loans for a PPOR. With an IP the offset isn't as big a deal.
Alex

Is interest only with offset, the best for cashflow. Is the interest simply taken from the offset account each month. Would it be the norm to have both my own and my wife's pay paid into the offset, and accumulate deposits for further IP's in that account. Is there much difference between IO loan with offset and a line of credit? Is it the norm to also regularly put money into managed funds rather than keep it in the offset to accelerate saving towards the next IP?
 
Currently the unit is in my name only (which would become a rental), the ppor would be in both names. Would it only be subsequent IP's to place in trust structures?

That's up to you. You can theoretically transfer the IP into a trust, but should keep the PPOR in your own name (ATO usually frowns on having the PPOR owned by a trust). You'd have to pay stamp on it, though. Putting future IPs in trust means you don't have to pay stamp again to change ownership.

Is interest only with offset, the best for cashflow. Is the interest simply taken from the offset account each month. Would it be the norm to have both my own and my wife's pay paid into the offset, and accumulate deposits for further IP's in that account. Is there much difference between IO loan with offset and a line of credit?

Interest is taken from whatever account you want. The key point in using an offset for PPOR is that you put as much extra money into the offset as possible. So if you take interest out of the offset but then put your salary into the offset as well, that's just semantics.

IO is good for cashflow. Offset is for flexibility especially for when you want to buy other IPs or move PPORs. In short:

1) When buying IPs: transfer money from the offset into the loan itself. Then redraw and buy the IP. The redraw is deductible. Buying an IP with offset money means that deposit is NOT deductible.

2) Moving PPOR: use offset funds as a deposit for the new PPOR.

Basically it maximises your deductible debt no matter what you decide later on.

May I suggest you read more about just what makes a loan deductible, as I think you might be confused about just what makes the offset special in the case of buying an IP and buying a new PPOR. Specifically, you're talking about using money from an offset against your PPOR to buy IPs, which is NOT the right way of doing it (you should transfer the money from the offset into the loan and then redraw / refinance).

Is it the norm to also regularly put money into managed funds rather than keep it in the offset to accelerate saving towards the next IP?

Depends on how much you expect to earn. At 30% tax your offset 'returns' something like 10% before tax. If you expect a managed fund to do better than 10%, then you might consider doing that.

In my personal case, I want to diversify so I'll buy shares and so on anyway.
Alex
 
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