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Dear Terry
That stuff from the ATO has been listed since 2001 in Agressive Tax Planning, its ATO propaganda, remember the ATO do not make the law the courts do. The ATO often loses just as they did with Janmore Nominees, that case still stands. So does ID 2002/388 AND I have written confirmation from ATO in addition to the ID 2002/388.
You just need a pre-1999 Trevisan Trust. This is where a unit is trust owned by a SMSF. the ATO treatment is thus changed. These are not my opinion they are facts, as Keynes the famous economist said:
" when the facts change, I change my mind, what do you do, Sir ?".
Go check out the ID 2002/388. Just tell me you wnat a copy of the correspondence and I'll email it to you.Regards
Anthony
)Hi Sallyann,
There are some issues with this, as follows:
1.
P1 will NOT be entitled to deductions if P1 also lives in the property because the tax act says about these expenses:
"any expense neccessarily incurred in the production of assessable income, unless its of a private, capital or domestic nature."
So you see you cant deduct any of the costs if its also your residence.
2.
P1 will not be entitled to all deductions if rehtal is only 50% of the market rate.
3.
What if down the track P2 says Ive lost my job cant work and cant pay rent, how do you evict them ? they have the keys and personal items in the house ?
Heres an arrangement that will work, I am assuming that each party has some cash but that P1 will have to borrow some funds from the bank,1. P2 makes a loan at market interest rate to P1.
2- P1 and P2 agree top set up a private unit trust with a company as trustee,
3. P1 borrows balance needed from bank, so P1 has 2 loans, one private and one bank,
4. P1 buys units in the trust with all the money and the trust buys the property,
5. The trust rents property to P2 at market rate, but P2 receives (taxable) interest on the loan to P1 and this reduces the rent cost,
6.P1 will agree for trustee to give 2nd mortgage on property to P1 for the loan, this can be registered or unregistered
7 P1 can also allow P2 to hold a mortgage over some of the P1 units as a second security,
8 P1 gets deduction for all interest paid to P2 and bank,
9 Property trust gets depreciation and distributes net income to P1 including some tax free income
10 If sold, proceeds can be used to repay bank debts and P1, who pays out loan to P2
They may have a separate agreement as to sharing the profit/loss.
Cost to set up about $1200-$1500 excluding loan costs
Make sure that the parties discuss this very fully and cover all issues like what if either:
Get sick, die become disabled, bankrupt etc, also probable to use mutual wills.
Regards
Anthony)
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