This seems an interesting way of tax minimisation on a PPoR. However, although the trust can claim the various deductions of an IP, doesn’t it also need to pay tax on the rental income and thereby largely negating the benefit?
The amount of tax payable on the income will depend on how the trust’s income is distributed. Also doing this will mean you lose the PPOR CGT exemption.
Rod.
Yes, the trust will have to pay tax on the income received as rent, but I think the idea is to have the property negatively geared, so the trust actually makes a loss. This loss cannot be distributed, but could be offset by other income of the trust.
The trouble is the trust must charge you market rents, so over time, the property will become positively geared so the trust will then have the problem of distributing this income. So you could end up paying tax on your own home. Maybe this could be offset by distributing to low income beneficiaries or the trust buying further negatively geared property.
And as Rod said, you will lose your PPOR CGT exemption and the trust will also have to pay land tax.
It may be a good idea, if you are thinking of living there for only a few years, and then moving on.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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