All Topics / General Property / Discretionary Trust – Losses transferrable??
I read a post last night dated sometime in late 2003 re discretionary trust losses. (I had a power fluctuation and computer shut down before I could note the dates).
The discussion thread was about Trusts being able to pass only income to the beneficiaries and not losses in case of negative gearing. One of the post stated that – to claim the losses on individual’s tax return, borrow the money for buying IP as individual and not by the trust. However, the property is held under name of the Trust. So when the rental income is distributed to beneficiaries the interest on the loan is deducted from the income and the resultant losses are claimed on individual basis.[eh]My question is whether this is allowable i.e. is there a direct link between the individual’s interest expense and the income received from the Trust to allow the offset under tax rules?
Bid1006,
It depends on the type of Trust.
Hybrid unit Trusts allow you to negatively gear.
To learn more about Trusts I suggest you buy a copy of Trust Magic from http://www.gatherumgoss.com
Cheers,
Aceyducey
Bid, it is allowable as you are borrowing money to buy income producing units in the hybrid trust. So you can claim the interest on this money against your personal tax return.
see http://www.chrisbatten.com.au for some details.
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
TerrywI see your point now. How would the bank view this arrangement ie would it be comfortable lending the money for buying units. Maybe yes, if they still hold the mortgage over the property. I will check into this. Meanwhile, do you know any instances where this arrangement has been in place and worked well?
Bid
I have some clients who use Hybrid trusts and the banks have had no problems with the deals at all.
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
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