The Interview #11

[meatgroup]

That's great Keithj .... thanks for clarifying. Just something else I was meaning to ask.

How do you determine which property is own by the DT and which is owned by you directly? Is there a specific way in which you decide which goes where or was more an evolutionary thing ?

Thanks again Keithj

 

[keithj]

How do you determine which property is own by the DT and which is owned by you directly? Is there a specific way in which you decide which goes where or was more an evolutionary thing ?

Not really. In future I'd make sure my personal land tax threshold was used up before buying in trust. The main advantages of trusts are asset protection & income streaming - I have little need for either in the foreseeable future.

 

[stumunro]

Not really. In future I'd make sure my personal land tax threshold was used up before buying in trust. The main advantages of trusts are asset protection & income streaming - I have little need for either in the foreseeable future.

Thanks keith for some wonderful posts. Sorry if you have already answered this, but what happens with your deductibility when you draw down personal expenses from your margin loan? I think you may have answered this but I have not gotten my head around it as such

 

[keithj]

....but what happens with your deductibility when you draw down personal expenses from your margin loan?

Hi stu,

I've lent after-tax money to the trust. If I demand repayment (for personal expenses), then it must repay me. The way it does it is by drawing down the margin loan. So all the margin loan is fully deductable.

Probably a better way of thinking about it, is as an offset account rather than as a LOC.

Cheers Keith

 

[stumunro]

Hi stu,

I've lent after-tax money to the trust. If I demand repayment (for personal expenses), then it must repay me. The way it does it is by drawing down the margin loan. So all the margin loan is fully deductable.

Probably a better way of thinking about it, is as an offset account rather than as a LOC.

Cheers Keith

Have you only ever lent after-tax money for the shares strategy?

Have you ever topped down IP loans to put towards shares, therefore making LOE deductions unclaimable (unless for income producing investments)

If so how would this work with a margin loan?

Many thanks!!

 

[keithj]

Have you only ever lent after-tax money for the shares strategy?

Have you ever topped down IP loans to put towards shares, therefore making LOE deductions unclaimable (unless for income producing investments)

If so how would this work with a margin loan?

I've always drawn down all available IP equity (to 80% LVR) & put it into the ML. It's cheap money & also provides good free asset protection for the IPs in personal names.

There's no contamination of the ML by pre-tax & post tax funds AFAIK. I understand this is because I personally have loaned $$ to a 3rd party trust. What the 3rd party does with the $$ that IT borrows (from me) is its' business.

 

[stumunro]

I've always drawn down all available IP equity (to 80% LVR) & put it into the ML. It's cheap money & also provides good free asset protection for the IPs in personal names.

There's no contamination of the ML by pre-tax & post tax funds AFAIK. I understand this is because I personally have loaned $$ to a 3rd party trust. What the 3rd party does with the $$ that IT borrows (from me) is its' business.

do you capitalise the interest repayments from the drawn downs via the ML as well?

 

[keithj]

do you capitalise the interest repayments from the drawn downs via the ML as well?

No, they get paid from rents. I do put some of the dividends back into the ML, so not all ML interest is capitalised. As dividends rise faster than my (anticipated) outgoings it won't be long before there's no capitalised interest.

 

[stumunro]

No, they get paid from rents. I do put some of the dividends back into the ML, so not all ML interest is capitalised. As dividends rise faster than my (anticipated) outgoings it won't be long before there's no capitalised interest.

Thanks you keithj

P.S what an almighty thread you started a few years ago on Capitalising Interest. And that's without being able to see Steve Navra's contributions which I'm assuming were massive.