We’re about to start on our kids (10 & , My son (8 yo) saves his pocket money and buys his own ps2 games….(yes not value adding) he also looks at trading games he doesn’t play with. his really tight with his money and usually collects my loose change I leave on the counter. He is arranging a toy garage sale and has seperated his toys. My daughter (10 yo) on the other hand spends what she’s given staright away

We’re looking to start them on a 2 month saving goal…basically they have to write down what they want to buy and how much it will cost (but no more than 50% of their 2 month allowance) and the balance would be either put in their bank account (they will go to the bank and deposit it) or I will include it when I buy shares..they can derive more income by selling toys, or doing duties..and these funds will go to achieving their goal..if they choose

I’ll see how it goes and their response to it

Regards

Claude

The hybrid trust is a unit trust and revenue must be distributed to the unit holder….so I would imagine that if you have the borrowing for the units in the Trust then you have would get the income. You can issue capital units and income units so your wife could get the capital gains from the sale of the property whilst you get the income from the rent (that off sets the interest of the borrowing). In our case my wife has 100 capital units and I have 450,000 income units…so I would get nil capital distribution (i.e. capital gains from sale) but all the net rental income.
Beauty about Hybrids is that if circumstances change, The Hybrid Trust can borrow money (if you get finance!!!) and buy back your units and the Trust reverts to a Discretionary Trust

I recommend Dale Gatherum-Goss’s Trust Magic….You can google it and see what web sites you get on the hit…I think he’s got his own website and is fairly highly regarded in the property investment industry

With all these, you need to check out your own circumstances and see if this type of structure works for you…My belief is if you have CF +ve properties then a Discretionary Trust will be better

I’m not a Tax accountant…(though I am an accountant) but got this info from Dale’s book and some other discussions with lawyers

Hope it assists

Claude

Regards

Claude

Some points

Discretionary Trusts that have -ve cashflow can not distribute a loss to the beneficiaries, however are accumulated over the life of the trust and offset any future income that the trust earns. i.e. if there is a loss in yr 1 of $2k and in yr2 of $1k but a gain in yr3 of $4k, then the Trust must distribute a net gain of $1k

Hybrid Trusts in theory will always make a profit as the unit holder borrows money to buy units in the trust. The Trust buys the IP’s debt free and gets the rent from the IP. The trust then distributes according to the unit holder. eg I borrow $200k @ 7% to buy units in the Trust. The Trust then buys a property for $200k and rents at $18k p.a. with property expense of $8k (Net Income = $10k). The $10k income is distributed to the unit holder and can be used to offset interest of $14k (200x 7%)

Banks don’t like Hybrid Trusts and borrowing is difficult..I have found 2 after 12 rejections – St George & Bank West . Can provide you with a broker who specialises/understands in Financing with Hybrid Trust…if this is allowed by Steve

I can recommend a book written by Dale Gatherum Goss

The $1k of travel is not tax deductable but could be capital when sell the property..need to check with a Tax accountant

the post acquistion travel of $1k is tax deductable but only to the % that you visit the property vs holidays…I suggest a diary and copy emails to the property manager showing the times that you visit the property…helps in case of tax audit…I suggest also a minute/note in the Trust accounts that you as a director of the Trustee is visiting the property on behalf of the trust (if the trust owns the property)

Hope this helps

Claude

Regards

Claude