Hi all
My wife and I have set up a Discretionary Trust for the protection of assets.
We are looking at purchasing an investment property in WA and buying it through the Trust.
If we borrow 100% to purchase the property, can we negatively gear the property through the Trust? I don’t believe we can.
Would it be better to put it in my wife’s name and claim the negative gearing?
Any help would be appreciated.
ThanksSimon
Hi Simon,
You need to speak to an accountant as to the best way to structure your property portfolio.
Regarding a trust, you can buy any property in a trust structure. However, with a trust, any losses are held within the trust and cannot be claimed. They can then be offset against any other assets in the trust that make a profit. Therefore, if you know the property to be negatively geared, buying it via a trust can limit your ability to claim tax deductions.
As to whose name you should purchase the property in, that depends on so many factors and particularly your own personal circumstances, aims and goal. Speak to an accountant before you make a decision one way or the other.
Wendy
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http://www.affluencia.comWendy Chamberlain | Chamberlain Property Advocates
https://www.wendychamberlain.com.au
Email Me | Phone MeMelbourne Buyers Agent & Sellers Advocate | Independent | Flat Fee
Hi Simon
Dont want to contradict Wendy but this statement is not quiet correct
However, with a trust, any losses are held within the trust and cannot be claimed. This is certainly the case with a Disc Trust but the case with a HDT or Hybrid Dics Trust.
With an HDT the property is purchased in the name of the Trust and you buy units in the Trust by taking out a loan in the name of the Unit holder. You would then be able to claim the interest as a deduction and the rent would flow through to you by way of income.
Depreciation and Building write off work similarly.
Whilst there has been some recent discussion on HDT this mainly relates to case where the Trustees have the discretion to distribute income rather than having it as a matter of course.
The other concerning note in your post relates to the fact that you are looking at borrowing 100% of the purchase price. Whilst this is the traditional way of borrowing you need to be very careful that your lender does not cross collateralise the 2 securities.
Most lenders wil encourage you to do this as it gives them greater security but is certainly not a recommended course of action for an investor.
Structure them correctly and this will be the first step to what could be an enjoyable and profitable wealth creation path. Make your mistake here and it could be a costly one.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
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Richard,
If I read it correctly the unit holder would be the high income member of the trust and he/she could distribute some or all income to the lower income earner to minimise the income tax and maximise negative gearing. ?
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