Property Investors Trust

Yes I have it is some times refered to as PIT
It is a Hybrid trust . This is a unit trust with a discretionary ability also.
There has been uncertainty with the way the tax office views these.
The idea is you borrow money to buy the units of the unit trust and then the trust buys the property.
The interest cost is then suppose to be claimable. ATO may disagree get professional advice from an accountant.
Read these links below
http://law.ato.gov.au/atolaw/view.htm?DocID=TPA/TA20083/NAT/ATO/00001
http://www.invested.com.au/4/property-investors-trust-facts-660/
https://www.propertyinvesting.com/forum/topic/21089.html
http://www.strategicwealth.com.au/articles/4/1/HDT-Taxpayer-Alert-from-ATO/Page1.html
http://www.taxlawyers.com.au/Manuals/hybridtrusts.htm
http://www.trustmagic.com.au/inf/Finance-Hybrid-Trusts.pdf
http://www.investorone.com.au/index.aspx?p=propertyInvestment
http://www.bartier.com.au/publications/publicationDetail.aspx?PublicationID=230

The PIT is the trademarked name for a specific trust by a group called Chan and Naylor.

I hear it is a kind of hybrid trust and may be different to other hybrids. There have been lots of developments over the years and trust deeds have evolved, so what was once possible may no longer be possible. eg in the old days many were saying you could use a hybrid to claim negative gearing by borrowing to buy the units and then the trustee could minimse tax further by giving the income to the lowest income earner say that less tax is paid. The ATO said this was not commercial – why would someone borrow to buy units with no chance of getting an income from them.

So it seems now that the ATO's position is that to be able to claim the interest on the money used to borrow to buy the units the trustee must have no discretion on how to apply the income or capital gains of the trust – they must go to the unit holder or there is no commerical reason to claim an interest deduction.

A family trust is ususally just a discretionary trust. Which type of trust it is should have no effect on the sale of the property, but having a unit trust own the property may make it easier to sell part of the property by selling some of the units.

CHAN & NAYLOR "PROPERTY INVESTORS TRUST®" (PIT®) Achieves ATO Product Ruling PR2011/15

Difference between Product Ruling and Private Ruling

The Australian Taxation Office has released Product Ruling PR2011/15 which applies to new Property Investor Trust® Deeds (PIT®) established and executed after 27th July 2011 purchased from Chan & Naylor.

This is the first Product Ruling on individual trusts issued by the ATO and it is also the first time the ATO has given a Product Ruling on a trust product that is not centrally controlled by the sponsor or product supplier thereby giving the taxpayer more control.

This Product Ruling only applies to the Property Investor Trust® organised through Chan & Naylor and operated in accordance with the conditions approved by the ATO within this Product Ruling. A Product Ruling is an ATO blanket approval that is available to all taxpayers operating within the Product Ruling framework unlike a Private Ruling that only applies to a specific taxpayer and cannot be relied on by other taxpayers.

Taxpayers can now have certainty in relation to interest deductibility when using a Chan and Naylor PIT® Trust.

The PIT® however provides a lot more than just a trust that allows full interest deductibility. PIT® benefits include:

1. There is no Vesting Date hence will not trigger capital gains tax and stamp duty because the trust does not cease and goes on forever. Most other Trust Deeds have a Vesting Date of 80 years which than triggers a capital gains tax and stamp duty for the beneficiaries and stops the property from being passed from generation to generation tax effectively.
2.  Will allow interest to be claimed as a tax deduction in the taxpayers/unit holders hands thus negative gearing can be claimed against an individual's wages. Unlike many other Hybrid Trusts where the interest may not be tax deductible.
3. Provides asset protection as the property is held separate from the individual.
4. Provides a land tax threshold in most States of Australia except NSW so that one can minimize and even eliminate land tax in some States
5. Protects the property from the marriage breakdown of your children
6. Designed specifically for property and eliminates the E4 problems with other Trusts which trigger larger capital gains tax when the property is sold.
7.  Allows control of the property to change hands such as the Trustee without triggering capital gains tax and stamp duty and enables the splitting of the assets of the Trust.
8. Allows the beneficial or unit holders to change hands with no stamp duty in some states.
9. If there is little or no gearing involved allows the flexibility to distribute the net rental to the lowest taxpayer.
10. There is an ATO approved Product Ruling PR2011/15 giving you certainty of your tax deductible interest unlike most if not all other Trust Deeds.

The Chan & Naylor Team

http://www.chan-naylor.com.au

Disclaimer: the above points are not an exhaustive explanation of the advantages of the “Property Investors Trust®” (PIT) ® and one should not rely on them without getting individual advice as the PIT may not be suitable to you in your circumstances.

Also the above points have not covered off on how the requirements of the ATO Product Ruling PR2011/15 apply to you.

Please note that the Product Ruling is only a ruling on the application of the law. It is in no way (either expressly or implied) a guarantee or endorsement of the commercial viability of the PIT®, of the soundness or otherwise of the PIT® as an investment or of the reasonableness or commerciality of any fees charged in connection with the PIT®.

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Any advice given here is of a general nature only. We disclaim responsibility from anyone relying on advice from this posting. We recommend that you seek your own independent advice

 Hi Terry,

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