Thanks for the responces.

I have done some further investigations based upon the points the 3 kind members have raised.

http://users.bigpond.net.au/renton/trc.htm

This site answers some questions re: trusts.

“”Q. I am looking into setting up a trust to hold some investments, which will be negatively geared. I have become aware of a hybrid discretionary trust structure that some property investors are using to hold negatively geared property, which gives them the tax and non-tax advantages of family trusts.

A hybrid trust seems to be a combination of a discretionary and a unit trust. Have you any advice in regard to the advantages and disadvantages of using a hybrid trust in this context?

A. A hybrid trust is a trust which is non-discretionary for some capital and/or some income and discretionary for the balance.

However, the tax features of negative gearing do not depend on the type of trust. They do depend on the total trust portfolio, as trust losses cannot be distributed to beneficiaries. Thus unless there are other trust assets generating sufficient profits the net losses can only be carried forward.

In regard to the more general matter: In the absence of special circumstances, a discretionary trust, with its complete flexibility, would normally be more useful than a wholly or partly unitised trust.””

Thinking i have a better understanding now. It seems as i have no other properties in the trust that would be generating income to offset losses it would be better if the amount borrowed for the house and land generated losses equal to the gains.

Cant see many advantages if i hold the property, though if i sell it soon after completion the trust could borrow the full amount, and the interest costs could be offset against any gains. I could distribute the gains at my discretion.

Time to call the accountant!!