When taking out a unsecured loan from a discretionary trust (which will be used to purchase income producing investments - with the intention to claim the interest as a deduction) I am told that the interest rate needs must be at a commercial rate to avoid issues with the ATO. Hence I am trying to find a link (preferably to something on the RBA website) that can give me the rate I should be using each month. The link "http://www.rba.gov.au/Statistics/Bulletin/F05hist.xls" provides a list of different indicator lending rates, but not sure which one I am supposed to use. Can anyone assist? Regards, Jason
Hangon. You want to take a loan FROM a disc. trust ? Why ? What is the purpose of having a trust if you don't intend to hold your assets in it ? Why bother with the expense and hassle ?
Sim, The loan from the trust is a short term solution. I have a loan that has a focus of debt for investment purposes but is *secured* against my PPOR. I am selling my PPOR and won't be buying another for a year or so but wish to maintain the tax deductability of the loan. Hence am refinancing to a unsecured loan from the trust and then in a years time will refinance again to a loan secured against my new PPOR. In the long term, I will be attempting to build up significant assets in the trust Regards, Jason
Fair enough. I've seen loans (eg margin loans) that will use something like 2% above the 90-day bank bill rate for their variable loans.
The unsecured personal loan (fixed or variable) seems appropriate on your brief facts. Another possibility is to secure the loan against your investments so you pay a lower (e.g. margin) rate AND maybe get some asset protection since your Trust holds prority as a secured creditor ? Also you know that it won't play silly securities lending games with your assets. Cheers, Rob
I had been told to use the unsecured personal loan interest rate but from the link I found on the RBA website "http://www.rba.gov.au/Statistics/Bulletin/F05hist.xls" this seems to be currently 14.1% which seems extremely high to me. Not sure that the ATO would like me using that! Or am I misreading the loan indicators off the RBA website? Regards, Jason
A loan to a creditworthy borrower paying 14% sounds a pretty good asset for the trust to own in today's climate!!
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