Hi
I am about to transfer my managed fund into my family trust, do I treat that as a gift or a loan ?what is the difference and why would I choose one over the other.
I think I can understand why I would do the kids "money" as a gift (so they can't ask for the money back) but for me is there any advantage. ?
cheers
MattI gift is not returnable a loan is.
So say you loan it to the trust and then you go bankrupt, that money is still yours, it is just being held by the trust. So the money loaned would be available to creditors.
If you gift it is much safer – but gifts can be reversed under the bankrupcty Act under a few circumstances such as if it was done with the aim of defeating creditors etc.
There are also tax consequences. claiming of interest etc
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
thanks for the help again.
so if I was going to mark the loan as an interest free loan then it should probably just be a gift. (e.g just put $200 as a trust expense for birthday presents, I should just say the $200 came in as a gift, that way when the trust earns $200, there is no need to pay tax and the trust can then give me the money (no tax required as it's been "taxed") or keep it in the trust bank account)
When I buy a IP in the trust, I will borrow borrow 80% in the trust name, then use a personal LOC that I will draw down. I will lend (with interest rate) the trust the remaining 20% + Fees for IP purchase.
I will then claim the interest as an expence and the "repayment" as income, so that way it is all tax neutral (personal tax) ?
The trust can then claim the total interest charges (bank and me) as an expense. I think
cheers
MattMatt
I will then claim the interest as an expence and the "repayment" as income, so that way it is all tax neutral (personal tax) ?
All depends on what type of Trust you have set up. If it is a DFT then the answer is NO.
Richard Taylor | Australia's leading private lender
Hi Matt,
I think that you should probably spend at least an hour sitting down with someone going through the most appropriate structure for your needs. Yes, it will cost you money – but the cost of getting things wrong will make that pale in comparison.
Where are you based? Collectively, we'll all know at least one person not too far away that can help.FS
oh Richard now your've confused me (not that that's hard
)I thought,
DFT buys house
DFT borrow 80% for IP from Bank (IO)
LOC (IO) on PPoR
Me Lend $ to DFT (at my LOC interest rate)
DFT pays interest on Bank Loan
DFT pays Interest on Loan from Me
If DFT is negativly geared, that "loss" stays in DFT to offset future $$ (I'm not trying to take this interest expence)I declare income from Loan I provided to DFT (interest payment received from DFT)
I declare interest expence from LOC (I incurred this expence as I leant money out an interest rate)cheers
MattN.B as a side note, the current IP is going through the sale process(early part, have REA, Solicitor), so hopefully it goes through quickly and we get it on the market and sold. So we can buy some more in the DFT.
Hi Matt
Good to hear about the sale process.
My apologies i may have misread your quote i was under the impression you had thought that the Trustees of the DFT could claim the loss each year.
Your revised understanding is correct.
Richard Taylor | Australia's leading private lender
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