Steve Navra's Cash Bond?
- Thread starter agent007
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Hi Beech
Gee, a tax person Im not, a deduction might carry, though it could be argued that this particular investment (the annuity only) never had a chance of breaking even from day one and thereby the interest is not claimable under 51.1
but why in the world would you spend 6.5 to get 3 ? unless there's the growth asset youve geared into ?
ta
rolf
Gee, a tax person Im not, a deduction might carry, though it could be argued that this particular investment (the annuity only) never had a chance of breaking even from day one and thereby the interest is not claimable under 51.1
but why in the world would you spend 6.5 to get 3 ? unless there's the growth asset youve geared into ?
ta
rolf
Thanks everyone for your contribution. In summary, this is what I understand now:
1/ The interest of a loan from a LOC is TAX deductible if it was used for investment purposes. In this case, the investment was the Cash Bond.
2/ The “income” or annuity paid by the Cash Bond is TAX free since this is capital and ATO doesn’t not tax capital.
3/ The interest generated by Cash Bond is Taxable.
4/ What one does with Cash Bond’s “income” or annuity doesn’t matter.
5/ ATO can’t oppose this investment technique since it will imply changing the whole TAX structure. The main point been is that Capital is not taxed.
Thanks,
James.
1/ The interest of a loan from a LOC is TAX deductible if it was used for investment purposes. In this case, the investment was the Cash Bond.
2/ The “income” or annuity paid by the Cash Bond is TAX free since this is capital and ATO doesn’t not tax capital.
3/ The interest generated by Cash Bond is Taxable.
4/ What one does with Cash Bond’s “income” or annuity doesn’t matter.
5/ ATO can’t oppose this investment technique since it will imply changing the whole TAX structure. The main point been is that Capital is not taxed.
Thanks,
James.
Hi,
Sorry I'm so late in on this thread:
There is the law, there are rulings and then there is the 'spirit' of the law / ruling
The purpose of the loan, is to obtain an income that enables one to acquire an income producing asset.
DaleGG (In his ref to the actual ruling) is 100% correct in what he states:
NOTE HOWEVER: that,
Firstly the cashbond MUST be necessary in order to obtain the loan.
Secondly, an income producing asset MUST in fact be purchased.
Thirdly, that the income IS FULLY TAXABLE and then subject to the capital rebate. (Yes yes, amounts to the same thing, but is technically important to the ATO)
Lastly, as Duncan aptly stated: that using the funds to repatriate non deductable debt is against the spirit of the ruling. In a similar way to say the split loan scenario.
I STRONGLY suggest that every client obtain advice from their accountant and apply for an individual ruling so as to claim the deduction.
Obtaining the tax deduction is obviously good for your cashflow, but even WITHOUT the deduction, the ability to double / triple your serviceability is highly advantageous.
Lastly, diverting the income from the cashbond into a share portfolio creates yet another income producing factor to the equation, making the claim for deductibilty even stronger.
(On selling the shares, CGT or income tax when trading will be payable; so the ATO gets their share)
Happy days,
Steve
Sorry I'm so late in on this thread:
There is the law, there are rulings and then there is the 'spirit' of the law / ruling
The purpose of the loan, is to obtain an income that enables one to acquire an income producing asset.
DaleGG (In his ref to the actual ruling) is 100% correct in what he states:
NOTE HOWEVER: that,
Firstly the cashbond MUST be necessary in order to obtain the loan.
Secondly, an income producing asset MUST in fact be purchased.
Thirdly, that the income IS FULLY TAXABLE and then subject to the capital rebate. (Yes yes, amounts to the same thing, but is technically important to the ATO)
Lastly, as Duncan aptly stated: that using the funds to repatriate non deductable debt is against the spirit of the ruling. In a similar way to say the split loan scenario.
I STRONGLY suggest that every client obtain advice from their accountant and apply for an individual ruling so as to claim the deduction.
Obtaining the tax deduction is obviously good for your cashflow, but even WITHOUT the deduction, the ability to double / triple your serviceability is highly advantageous.
Lastly, diverting the income from the cashbond into a share portfolio creates yet another income producing factor to the equation, making the claim for deductibilty even stronger.
(On selling the shares, CGT or income tax when trading will be payable; so the ATO gets their share)
Happy days,
Steve
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Steve,
what happens to your investment structure when you sell your PPOR (the equity used to buy the cashbond)?
what happens to your investment structure when you sell your PPOR (the equity used to buy the cashbond)?
Well the structure is still there, guess your PPOR is gone
Hi Aiden,
Okay I couldn't keep you hanging for too long
Generally the loan against your PPOR would be at an 80% maximum, which includes the cashbond portion.
The proceeds from the sale would be used to pay out the 80% loan.
You are now left with a cashbond returning capital and interest for # of years and some investments. You might use the balance of the proceeds less sale costs to purchase a new PPOR.
Why sell the PPOR??
Regards,
Steve
Okay I couldn't keep you hanging for too long
Generally the loan against your PPOR would be at an 80% maximum, which includes the cashbond portion.
The proceeds from the sale would be used to pay out the 80% loan.
You are now left with a cashbond returning capital and interest for # of years and some investments. You might use the balance of the proceeds less sale costs to purchase a new PPOR.
Why sell the PPOR??
Regards,
Steve
addicted
Have a look on Steve's website (which you can find through his profile). There is an explanation of them there.
Also, do a search through the archives, there a couple of really good threads that cover the subject but I can't recall them off the top of my head.
And if they don't help, try searching some of the major insurance company sites and look for information on immediate annuities. To me anyway, they appear to be the same thing.
Good luck and happy reading
Cheers
Paul
PS. I just ran a couple of searches and they returned heaps of results.....hit the search button at the top left of your screen and they should still be in the recent searches list. If not just search for cash bond or cashbonds
Have a look on Steve's website (which you can find through his profile). There is an explanation of them there.
Also, do a search through the archives, there a couple of really good threads that cover the subject but I can't recall them off the top of my head.
And if they don't help, try searching some of the major insurance company sites and look for information on immediate annuities. To me anyway, they appear to be the same thing.
Good luck and happy reading
Cheers
Paul
PS. I just ran a couple of searches and they returned heaps of results.....hit the search button at the top left of your screen and they should still be in the recent searches list. If not just search for cash bond or cashbonds
Addicted,
The best place to learn about the cash bonds is at one of Steve's seminars.
But there's an article on his website which gives an overview- http://www.navra.com.au/includes/writings/cashbondfirst.php
The best place to learn about the cash bonds is at one of Steve's seminars.
But there's an article on his website which gives an overview- http://www.navra.com.au/includes/writings/cashbondfirst.php
The purpose of the loan, is to obtain an income that enables one to acquire an income producing asset.
DaleGG (In his ref to the actual ruling) is 100% correct in what he states:
Secondly, an income producing asset MUST in fact be purchased.
Hi Steve,
What if I am getting into retirement mode? and all I want is an income?. Does it mean that the Cash Bond won't assist me in achieving this?.
Thanks,
James.
PS. I am currently enrolled for your next course.
DaleGG (In his ref to the actual ruling) is 100% correct in what he states:
Secondly, an income producing asset MUST in fact be purchased.
Hi Steve,
What if I am getting into retirement mode? and all I want is an income?. Does it mean that the Cash Bond won't assist me in achieving this?.
Thanks,
James.
PS. I am currently enrolled for your next course.
Steve,
If you direct the income from the cashbond into a share portfolio and your share portfolio loses money. Have you then commited fraud because the income that you claimed to the lender to satisfy servicability would be incorrect?
If you direct the income from the cashbond into a share portfolio and your share portfolio loses money. Have you then commited fraud because the income that you claimed to the lender to satisfy servicability would be incorrect?
Hi 007,
Are you thinking of getting out of the espionage business??
The cashbond serves a few purposes:
In your case it would appear that:
Cashbond might be used to create extra serviceability that will allow you to set up your retirement structure.
Then, based on your structure, the income from the cashbond could form the basis of your passive income requirement. (What you wish to live on)
Obviously, everyone's situation and personal requirements are different, so a full assessment of your situation and needs will be necessary before any meaningful advice can be offered.
(Part of the course and follow up that you have booked for)
Look forward to meeting you then
Steve
Huh
The income that you have declared is GUARANTEED for the term of the bond; that is the serviceability issue.
If you place the income into repaying the loan / share investment / new property / horse race / lose all the money, is NOT the issue.
So what you do with the income is your prerogative: some will use the proceeds smartly, some will not.
Your choice
Steve
Let me put it to you another way..
How would you service the loan if your share portfolio does not make enough money to cover the interest repayments for the equity you drew down for the cash bond?
How would you service the loan if your share portfolio does not make enough money to cover the interest repayments for the equity you drew down for the cash bond?
Servicing of the loan preceeds investing / spending the dollars.
Passive income for the purpose of lifestyle / further investment are net of the structure expenses.
Regards,
Steve
