Good people,
I’ve some more trust questions. I thought i knew the answer to some of these q’s but i’m doubting my grasp of it all, so i’d like to here you guys answer these questions.
Please answer them if you can, as the sooner i get this stuff straightened out in my noodle, the better.. (please itemise your answers if you could as this is specific stuff).
When a corporate trustee instigates property being bought for a trust:
1) Who legally owns the property?
2) Who’s name is on the title?
3) In who’s name is the debt? That is, does the bank lend to the trustee or the trust?4) I am director of the corp trustee. When i garentee loans with banks when acting as director, if the trust goes bust, and the pty folds, am i liable for the debt?
5) If a trust is deemed a property trader
and as a result GST applies, who registers for the GST? The trust or the corp trustee?6) Who is the property trader? The trust or the trustee?
7) If a trust is a GST registered property trader, does all profit that comes out have GST applied irrespective of who it is distributed to?
Can a corp trustee be a primary benificiary of its own trust? I’ve been told the ATO frowns on this.9) How, if ever, can a GST registered property trading trust (say that fast..) take advantage of the CGT benifit?
Hope you can answer em. thanks.
PS don’t forget to itemise…[biggrin]
Cabo Wabo
Originally posted by Cabo Wabo:Good people,
I’ve some more trust questions. I thought i knew the answer to some of these q’s but i’m doubting my grasp of it all, so i’d like to here you guys answer these questions.
Please answer them if you can, as the sooner i get this stuff straightened out in my noodle, the better.. (please itemise your answers if you could as this is specific stuff).
I’ll have a crack at it- what kind of trust though (i’ll assume HDT)..cata or coasty mike would be your best bet though..When a corporate trustee instigates property being bought for a trust:
1) Who legally owns the property?
The trust
2) Who’s name is on the title?
The trustee’s
3) In who’s name is the debt? That is, does the bank lend to the trustee or the trust?
Bank lends to you, you buy units in the trust4) I am director of the corp trustee. When i garentee loans with banks when acting as director, if the trust goes bust, and the pty folds, am i liable for the debt?
You sure are..hence the Guarantee…5) If a trust is deemed a property trader
and as a result GST applies, who registers for the GST? The trust or the corp trustee?
? HDT may not be best option to trade in properties..speak with the experst regarding best options if this is your strategy6) Who is the property trader? The trust or the trustee?
The owner of the properties7) If a trust is a GST registered property trader, does all profit that comes out have GST applied irrespective of who it is distributed to?
Can a corp trustee be a primary benificiary of its own trust? I’ve been told the ATO frowns on this.
I believe it can be..9) How, if ever, can a GST registered property trading trust (say that fast..) take advantage of the CGT benifit?
Hope you can answer em. thanks.
Tried to..as best I could, like i say there are better placed people and it may be better contacting them direct and explaining your strategyPS don’t forget to itemise…[biggrin]
Cabo Wabo
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorThanks Redwing,
This formum is great, everyone answers everyone’s questions. I have learn’t so much from this forum its just not funny.
I’m using a discretionary family trust.
Redwing, your answer to #3 – whose name is on the mortgage doc? Whom do you refer to as “you”. Is it me as an individual, or me as the director, and hence the pty?
When banks lend to a trust, do they always ask for a garantee from the director?
Please everyone, have a go at my questions.
Many thanks,
Cabo Wabo
Some small changes to redwings answers as it is a discretionary trust not a HDT.
3- Loan is inside the trust. Remember that a discretionary trust can not offset the loss (if -ve gear) as there are no special income units.
5- The trust.
6- The trust trades.
7- Best to speak to an accountant about income streaming.
8- Yes the corporate trustee can be a benificiary, but this is NOT advisable as the trustee must be a Non Trading Company for the best Asset Protection. The company must be a trustee only and not trade.
9- Best to speak to an accountant, but my thoughts are- if the trust is registered for GST
and sells an IP, the capital gain is not a goods or service. Thats why it is a seperate tax.Hope this helps
CATA
Asset Protection Specialist
[email protected]I’ll have a go too, although I am also not an accountant.
1) the legal owner is the company (in its capacity as trustee).
2) Company
3) Company and/or trust
4) Yes
5) ? probably trustee but I don’t think there would be GST on residential property
6) Company as trustee – company would not have to lodge a tax return, all money is thru the trust
7) I don’t think there would be GST on residential property
Yes
9) If you are trading, then there would be no GCT, only income tax.Terryw
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1-It is a semantic division which the law adopts: The trustee owns the trust
assets in name only – the benefit of those assets (enjoyment of them) is the
sole exclusive right of the beneficiaries of the trust.CATA
Asset Protection Specialist
[email protected]hi Cabo Wabo
heres my 002
check with an accountant but my understanding is the same for terryw 1,2,3,and 4 but 5 there is gst on residential property and commercial and the company registers for gst.
and the company does lodge a tax return even if it is non a trading company and it lodges a bas as well.
all the dealings are done by the company.
7 and 8 need to be worked out with an accountant as to the structure of the trust.
9 also check as there would be gst. from my understandinghere to help
If you want to get involved in some of the projects I’m involved in email to [email protected]Thanks fella’s.
With your responses, and after quizing a mate of mine, & my accountant i’ve finally got my head around this. My general understanding to my own q’s are as follows:
1) Who legally owns the property?
The company (acting for the trust)2) Who’s name is on the title?
The company3) In who’s name is the debt? That is, does the bank lend to the trustee or the trust?
The company (acting for the trust)4) I am director of the corp trustee. When i garentee loans with banks when acting as director, if the trust goes bust, and the pty folds, am i liable for the debt? Yes
5) If a trust is deemed a property trader and as a result GST applies, who registers for the GST? The trust or the corp trustee?
The trust registers as the trustee is only “acting”.Gross, I’ve been told the trustee pty only does a BAS statement if it GST registered, and you only become GST registered if you think ur gonna make more than 50K/yr. As the trustee is not trading, and makes no income, then it doesn’t have to do the GST side of things even though it still has to do a tax return.
6) Who is the property trader? The trust or the trustee?
The trust is the property trader, as the trustee is only “acting”.7) If a trust is a GST registered property trader, does all profit that comes out have GST applied irrespective of who it is distributed to?
No. GST is paid on the services of tradies etc when they fix the property etc. When a property is then sold, profits are considered capital gains only if you are not a property trader. If you only sell say 1 or 2 props, then they are considered to be of capital worth to you, and profits made on them are termed “capital gains”. If you kept em for over a year, you would qualify for the CGT benifit.BUT, If you are a property trader, then the numerous houses you buy and sell are not “capital assets” to you, but are “production stock”, and when sold, do not produce “capital gains” but produce “business income”. This means that the CGT benifit cannot be applied because the props are considered “production stock” which produce business income.
Can a corp trustee be a primary benificiary of its own trust? I’ve been told the ATO frowns on this.
Yes it can, but its best not to do this, as for some reason it is to the detriment of asset protection. Why? Does anyone know the background behind this?9) How, if ever, can a GST registered property trading trust (say that fast..) take advantage of the CGT benifit? It can’t. It must keep the property for over a year and not be a Property trader.
Thanks everyone for you help. Please, feel free to add or correct my interpretation of all your input, as i may be wrong.
Kind regards,
Cabo Wabo
8- The trustee is liable for any actions of the trust, as the trust can not make decisions by itself.
If the trustee is a $2 non trading company with no trading history it puts another layer of protection arround your personal assets. It shows a clear difference between your assets and the assets in the trust.
Hope this helps
CATA
Asset Protection Specialist
[email protected]Thanks Cata.
Cabo Wabo
From my understanding, it goes something like this….
In whos name is on the loan papers.
Usually you borrow the money and gift it to the trust.This is why trusts mean nothing to the banks.They can claim everything,regardless of trusts or companies titles.
So your answer is the people who loan you the cash own the “goods”.
bruham.Or you (as director of the trustee company) can go garantor for the loan that is from the trust. If you borrow money and gift it to the trust You are stuck with the repayments and no deductions for your tax, as you have not borrowed the money for investment.
CATA
Asset Protection Specialist
[email protected]
Can a corp trustee be a primary benificiary of its own trust? I’ve been told the ATO frowns on this.
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