I currently have a discretionary trust set up which holds some shares and managed funds. I borrowed money in my personal name (against my PPOR) and on-lent that money to the trust. This allows me to effectively tax-deduct the interest inside the trust. That's fine if the trust makes a profit, but recently it's been making big losses (with the GFC and all). I'd like to change this to a hybrid trust arrangement, so that I can tax-deduct the full amount of the interest in my personal name, even if it's greater than the income I receive (negatively gear). My trust deed already allows for issuing units, but what do I do when I'm not purchasing new assets with the borrowed money? Can I actually "convert" the loan (from myself to the trust) to income units - ie. effectively repay it with units instead of money? Are there any issues I need to watch out for with this or with hybrid trusts in general? Finally, can you recommend someone in Melbourne who can give me professional advice on this (preferably in the CBD, though I'm vary of the prices )?