HI all
I have been reading on here for a bit and now I need some advice.
I am married and my wife and I are looking at buying a house with another couple.
The house we are looking at is $500,000 and has a couple of years left on a DHA lease.
Upto this point, we haven’t thought about investing with another couple, but it we like the idea of basically not having to take the full cost of a loan on.
We have been advised to look at a trust set-up. But I am wondering if you can still negative gear your income?
Ie, a loan would cost say $1300 per fornight and rent would be $800 per FN. So each couple would need to put $250,per PN or $500 a month towards the cost of the loan repayments. Are we able to claim this $500 per month?
If you can’t, what are the advantages of going into partnership and setting up a trust?
Negative gearing our joint income was always attractive to us, but if we weren’t getting a tax benefit I don’t know if a trust is best for us.
Any advice would be so great!
If you are referring to a Discretionary Family Trust then No you cannot negative gear and any losses a closeted within the Trust.
Remember however that 1 day the property or asset is likely to be positively geared and at this stage the flexibility of income distribution maybe extremely useful.
If however you are thinking about a Unit or Hybrid Trust then Yes you can claim any negative gearing but will find financing a little harder and HDT might well bring about a closer look by the ATO.
Richard Taylor | Australia's leading private lender
I have a Family trust which my accountant has told me is excellant if the investment property which the trust purchased in 2007 becomes positively geared from what I can gather it is similar scenario trust function as to comments Qlds007.
My concern is that after three years of payments and little or minimal capital gains, whats the point of having the trust in the present if there is no capital gains for the foreseeable future
Can I get rid of the trust and just negative gear the property against my salary.
Anyone got any ideas how you do this, Would appreciate any advise!!!!!!
Regards
Mossman
u can transfer profit from another trust to offset the loss, so effectively u don't pay tax on the profit from the other trust.
if you don't have another trust that making profit, then loss will be locked in this trust with no benefit.u may want to consider the asset protection that the trust provide too. also, u may want to set up a proper JV agreement with the other couple to avoid any legal complication.
also note that the properties in the trust have no exemption of land tax. and make sure you do tax return for the trust every FY too.
Mossman wrote:I have a Family trust which my accountant has told me is excellant if the investment property which the trust purchased in 2007 becomes positively geared from what I can gather it is similar scenario trust function as to comments Qlds007. My concern is that after three years of payments and little or minimal capital gains, whats the point of having the trust in the present if there is no capital gains for the foreseeable future Can I get rid of the trust and just negative gear the property against my salary. Anyone got any ideas how you do this, Would appreciate any advise!!!!!! Regards MossmanIts unfortunate that there is no CG – but really there is no point in owing property at all if there is no CG. Transferring to yourself will help a little with the tax deductions though, but it is not really a long term solution.
You can't just get rid of the trust. Your trust needs to sell the property to yourself = stamp duty, loan costs + legals.
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
PRKLCD wrote:HI all I have been reading on here for a bit and now I need some advice. I am married and my wife and I are looking at buying a house with another couple. The house we are looking at is $500,000 and has a couple of years left on a DHA lease. Upto this point, we haven't thought about investing with another couple, but it we like the idea of basically not having to take the full cost of a loan on. We have been advised to look at a trust set-up. But I am wondering if you can still negative gear your income? Ie, a loan would cost say $1300 per fornight and rent would be $800 per FN. So each couple would need to put $250,per PN or $500 a month towards the cost of the loan repayments. Are we able to claim this $500 per month? If you can't, what are the advantages of going into partnership and setting up a trust? Negative gearing our joint income was always attractive to us, but if we weren't getting a tax benefit I don't know if a trust is best for us. Any advice would be so great!The shortfall will be even more when you take into account other costs. If the house is owned by the trust then any loss cannot be used to offset your personal incomes.
However, if you were to by units in a trust (either hybrid unit/discretionary trust of a unit trust) you can borrow to buy these units and claim any loss against personal incomes. But there are many downsides with this such as all the incomes and CG would need to go to the unit holder so there would be no tax flexibility and little asset protection. One possible advantage is the units may be able to be transferred into a superfund later on without stamp duty.
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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