I just had an idea:
my wife and I currently rent and have 1 ip in Bne. We are planning on doing plenty more investing starting now.
If we set up a trust and buy a house to live in through the trust can we rent it from the trust and can the trust negatively gear it so that we actually negatively gear our own home at no “real” loss… we were thinking this might work well on a Devine Home or similare development home as depretiation would be higher… or would it?
Sound reasonable?
What the mind of man can conceive and believe, it can achieve.
riffraff you can indeed rent a house off your own trust. However, if it is ‘negatively geared’ the trust losses cannot be passed down to yourselves (unless a unit trust I think and then the ato might want a closer look). Any losses must be carried forward in the trust.
However, it can offset (again I think!) other income losses the trust is having, so with depreciation you could theoretically have distributions from the trust that are ‘tax free’ – speak to your accountant!!!!
Cheers
MelHi
Trusts cannot distribute losses-they can keep the losses to be offset over future gains. But you may be able to get around this by using a hybrid trust and borrow to buy units in the hyrbid trust. The highest income earner would usually borrow to buy the units and claim the interest as a tax deduction on their personal income. the trust would make a profit (as there is no interest to claim) and this could be distributed to the lowest income earner.
Tax laws are changing all the time, so this may change.
For more info check out Dale Gatherum Goss’ Trust Magic and http://www.chrisbatten.com.au
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Mel posted as i was typing. There is actually a tax ruling on renting your house from a unit trust. See TR 2002/18. available at http://law.ato.gov.au/pdf/tr02-018.pdf
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
And that there is the problem!!!!
I need a good accountant…
ANYONE!?!?!?!
(the last one I had looked at me funny when I said I want to have the option of retiring at 30, I need one that would have said “right… but given your income you’ll need to…”)
What the mind of man can conceive and believe, it can achieve.
Thanks for that Terry. So it looks like you can still rent from a discretionary trust and negative gear, but have to carry the losses forward against future income.
Also, it only says that if you are the trustee or the director of corporate trustee. What if, for example, my family’s unit trust had some friends as trustees? This scenario I believe is also a way in which Australians mimic the American Nevada corporation, where nobody knows the shareholders (yeah, you can’t own the shares in the company then too!)
Cheers
Mel
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