Ibuy

You can still achieve the benefits of the difference between the company tax rates and individual tax rates by transferring the income to a company as beneficiary but without the disadvantage of the loss of the CGT discount. In fact your logic is flawed because the longer you hold the asset the greater your capital gain will be and the…[Read more]

Steve,

I must confess I havent read the April newsletter so my comments may in fact be rather ignorant. Anyway I’ll give some of my thoughts on the topic in general.

Firstly I am always perplexed as to why an individual wants to hold accumulating assets in a company. Although the income earned will only be taxed at a rate of 30% the real…[Read more]

B,

There are some excellent accountants in Sydney. Nick from Strategic Wealth Management and Ed Chan from Chan & Naylor are, from what I hear, very good.

Just make sure that when you say you want “someone able to call for advice and get an answer” that you are willing to pay for that advice.

In my practice I will only provide written advice to…[Read more]

Section 8-5 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction from assessable income where an amount is an allowable deduction under another provision of the Act.

Section 12-5 of the ITAA 1997 contains a list of provisions about specific types of deductions. Contained in this list is Division 36 of the ITAA 1997 with regard to…[Read more]

Apap,

Yes you will have to find the net loss of $5k (if you are on the top tax bracket the ATO will be funding about $2.5K so you will need to find another $2.5K) that is why it is called negative gearing.

Im at a loss as to what you mean by the $5K in depreciation remaining in the trust. It doesnt remain in the trust at all. It is used to…[Read more]

Apap,

If you have a loan in your own name to purchase the units in the HDT then the situation will be as follows:

HUT

Rental Income: $20K
Expenses: $5K
Depreciation on Units on Depreciation Schedule: $5K

Net Income $ 10K

Net Income distributed to HDT. You own all the special income units in the HDT so the $10K income will be distributed to…[Read more]

Sal,

It is not only skating on thin ice but it is illegal (i.e. in breach of the SIS Act).

If the superfund then purchased units from your parents it would have breached the ‘acquisition of assets from a member rule’ SIS Act s 66(1) and (3). Not only can the ATO make the fund non-complying (yes you do lose half the assets of the fund) but the…[Read more]

This transaction can’t be done. It is a breach of the in-house assets test.

A few things you and your accountant will need to ascertain. Firstly you will need to determine whether the renovations result in the supply of “new residential premises”. If they do result in a taxable supply of “new residential premises” – note that this will be based on the facts at hand – then you may possibly be liable for GST.

However…[Read more]

Scott,

you must be reading my mind. I was just about to post that the new PAYG Withholding Variation is now covered by Section 15-15 of the Taxation Administration Act.

Rich,

You can certainly establish an accounting practice through a trust structure but you should be aware of the various PSI rules and ensure that you comply.

With respect to the deductibility of costs for establish a business structure per S40-880, ITAA 1997, certain captial expenditure is deductible over five years if they were incurred in…[Read more]

The subdivision of land which was purchased prior to 20 September 1985, even if the subdivision occurs on or after 20 September 1985, will not change the pre-CGT status of the land, which is confirmed in Taxation Determination TD 7. That is, the subdivided land will maintain it’s pre-CGT status, due to the fact that no CGT event has happ…[Read more]

Another two negatives the HDT will pay land tax and if the property is located in NSW will be subject to the vendor duty.

Taxation Ruling TR 2002/18 talks about home loan unit trust arrangements and so the ATO would probably attack you there. There are a few lawyers around that advocate that provided the arrangement following the Janmor case…[Read more]

jcls,

You ask some very good questions but there are a lot of things to consider. I would suggest you seek the advice of an accountant with intimate knowledge of hybrid trusts and how they are used for investing purposes.

Terry, as usual, has explained the financing aspects very well.

Note that an accountant will also need to discuss with you…[Read more]

jcls

Unfortunately you have financed the property purchase through the hybrid trust. Not quite sure whether you sought professional advice before undertaking the transaction but in this case the losses are trapped in the trust. You will need to seek professional advice about the ability to carry forward the losses.

Sorry I don’t have good…[Read more]

jcls,

Maybe you don’t quite understand how the hybrid trust structure works but that’s ok because neither do most accountants. Anyway it works as follows:

1. You go to the bank and borrow say $500K
2. You then use the $500K to purchase special income units in the HDT.
3. The HDT uses the funds to purchase a property.

At the end of the year…[Read more]

jcls79,

Has the hybrid trust issued you with special income units ? Did you use the money from the purchase of these units to fund the property purchase ?

Steady,

The type of trust you are interested in is a hybrid trust. Basically it is a mix of a unit trust and a discretionary trust.

It works in that the you purchase special income units in the hybrid trust. This trust then purchases the property. The property is trust property, hence asset protection, and then the income from the property is…[Read more]

I agree with Terry. It sounds as though this accountant knows very little about hybrid trusts. The question I would be asking them is why should you carry forward the losses when you can utilise them through the use of a hybrid trusts. I would rather have the funds in my pocket for the years that it is negatively geared than to have them…[Read more]

The transfer of an interest in real estate does result in a change of beneficial ownership. In this situation, you have gone from owning a 100% interest in Property A to owning a 99% interest in that same property. This results in a disposal of 1% of your interest in Property A. The disposal of an asset is a capital gains tax event A1 (section…[Read more]