Rat race exit stage left?

From: Paul Roberts


With the build up of capital relatively easy, what do you support as a retirement-from-wages strategy? Obviously property investing and renovating is a life style and will never cease - slow down maybe but not stop. How do you turn capital into cash flow? The axiom of never sell is good advice given the continuity of capital gain and the large costs/taxes associated with selling, so what are the bright people doing to access cash flow? The idea of using borrowing against the capital to live on is flawed as this then is a non tax deductible debt and will continue to escalate. I'm not going to die young, time is the greatest gift. Also the taking of life insurance is very expensive as we age. I want my son to have a legacy not a whole lot of 'deceased estate' sales to cover the debt. There has to be a smarter way to do business.
So guru's and all lateral thinkers please help.

Regards

Paul & Jen

'No one can make you feel inferior without your consent'
Eleanor Roosevelt
'Data is not information, information is not knowledge, knowledge is not wisdom'
Phillip Adams
 
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Reply: 1
From: Rixter ®


Hi Paul,

The idea of
>borrowing against the capital
>to live on is flawed as this
>then is a non tax deductible
>debt and will continue to
>escalate.

So what if you cant claim all of it as a Tax deduction. If you owe $2mil with assets worth $4mil plus still appreciating why cant you pay for it? Why is it a problem?
Please dont get me wrong I'm not knocking you just looking to see your logic behind it. I think sometimes maybe we all get too carried away with whats deductable as investors and whats not. If you can carry the debt will it really matter?



Happy Investing,
Rixter :)
 
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Reply: 1.1
From: Donna L


I agree. If you are borrowing and living off
your equity you are using your own
money. You don't have a "taxable" income
so it is kind of immaterial whether the
loan interest is taxable or not.

Donna L
 
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Reply: 1.1.1
From: Dale Gatherum-Goss


Hi

If the assets are held in a trust structure then the interest on a loan used to pay wages or profit distributions will be tax deductible.

Secondly, the trust allows you to pay other expenses and claim them as a tax deduction so hat you can live quite well and pay little or no tax.

As I have said before, and to paraphrase Stephen Covey, start with the end in mind.

Have fun

Dale
 
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Reply: 1.1.1.1
From: Martin .


Excuse the slow uptake Dale, but on the previous post -

"If the assets are held in a trust structure then the interest on a loan used to pay wages or profit distributions will be tax deductible."

This would be the trust taking the loan, yes? and the "tax deductible" part would therefore apply to the trust's finances not to the one who is using the trust.
I only ask because it almost looks like the "tax deductible" part applies to the one using the trust.

As does the following -

"Secondly, the trust allows you to pay other expenses and claim them as a tax deduction so hat you can live quite well and pay little or no tax."

Is it possible to transfer the "claims" from inside the trust to outside the trust, or is this more of you can accomplish in your field and the inside/out relationship needs to be carefully set up to accomplish this facility?

Maybe one day I'll understand this stuff!

ML.
 
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Reply: 1.1.1.1.1
From: Rixter ®


Hi Donna,

For Non-Trust Structures,(ie Sole purchaser ,tenants in common & joint tenants) you still have to declare the weekly rental income collected and pay the appropriate tax necessary, so you will still have a Tax burden you can claim ligimate deductions against.


Happy Investing,
Rixter :)
 
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Reply: 1.1.1.1.2
From: Dale Gatherum-Goss


Hi Martin

>Excuse the slow uptake Dale,
>but on the previous post -


Don't be silly, there are few people (including professionals) who understand trusts properly. Ask away!


>"If the assets are held in a
>trust structure then the
>interest on a loan used to pay
>wages or profit distributions
>will be tax deductible."
>
>This would be the trust taking
>the loan, yes? and the "tax
>deductible" part would
>therefore apply to the trust's
>finances not to the one who is
>using the trust.
>I only ask because it almost
>looks like the "tax
>deductible" part applies to
>the one using the trust.


No, I'm suggesting that the trustee borrows more money and uses that money to pay the individual. As such, it is the trustee that claims the interest as a ax deduction.


>As does the following -
>
>"Secondly, the trust allows
>you to pay other expenses and
>claim them as a tax deduction
>so hat you can live quite well
>and pay little or no tax."


The trustee pays your personal expenses before tax rather than you paying them from after tax dollars.


>Is it possible to transfer the
>"claims" from inside the trust
>to outside the trust, or is
>this more of you can
>accomplish in your field and
>the inside/out relationship
>needs to be carefully set up
>to accomplish this facility?


It is possible if you use a hybrid trust instead of a family trust.


>Maybe one day I'll understand
>this stuff!
>


Good, when you do you can explain it to me . . . :))

Have fun

Dale
 
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