hi all
Just wondering how easy, or hard it is to rent a house that you have bought in a trust that you are the beneficiary of.
so that you can claim tax breaks
I know that you have to prove arms length but how easy is this.any comment would be great
Thanks
Nicko
There is actually a tax ruling on this in relation to a unit trust. The ATO didn’t like it as they deemed it a scheme to be able to claim the expenses on what would otherwise have been a person’s main residence.
But it could possibly still be done with a bit of careful planning.
But remember, trusts cannot negative gear. So your trust would need other income or you would need a hybrid trust to get around this.
Terryw
Discover Home Loans
[email protected]
Send an email to get my newsletter.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
Terry
thanks heaps for all your help not just in this situation. its great to have such a good pool of info to bounce things off
we have a friend that works in the ATO who actually suggested it to us and he is looking into in closer detail at the moment and wasn’t sure if he was pulling our leg or not.
because it has been our PPOR for the last couple of years the mortgage is quiet low and would actually be +ve geared. it would create another form of income for the trust so it can stand on its own when it comes to borrowing etc
Thanks
Nicko
Nicko
Just remember a Trust cannot borrow on its own.
The assets / liabilities / income / expenditure of the Trustees is considered when making an application for borrowing.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
New Shared Equity scheme has arrived – Email us for details.Richard Taylor | Australia's leading private lender
oh
I thought that if a trust generates income then it gets assessed like a person.
eg if the trust can service the loan with its passive income from other IP’s
is this true or do you have to go guarantor for every loan that your trust applies for
Nicko
Hi Nicko
Did you realise if you transfer property to a trust that it is similar to selling it. ie stamp duty will apply and maybe CGT (unless it is your main residence).
From my notes, here are some details on owning your own home in a trust:
Legal Cases:
Tabone and Commissioner of Taxation [2006] AATA 466 (29 May 2006)
http://www.austlii.edu.au/au/cases/cth/aat/2006/466.htmlTaxpayer Alert
TA 2001/1
Home Loan Unit Trust Arrangement
http://law.ato.gov.au/atolaw/view.htm?rank=find&criteria=AND~unit~basic~exact:::AND~trust~basic~exact:::AND~home~basic~exact&target=ZG&style=html&sdocid=TPA/TA20011/NAT/ATO/00001&recStart=1&PiT=99991231235958&recnum=1&tot=1&pn=ALL:::ZGTaxation Ruling
TR 2002/18
Income tax: home loan unit trust arrangement
http://law.ato.gov.au/atolaw/view.htm?rank=find&criteria=AND~unit~basic~exact:::AND~trust~basic~exact:::AND~home~basic~exact&target=EA&style=html&sdocid=TXR/TR200218/NAT/ATO/00001&recStart=1&PiT=99991231235958&recnum=16&tot=58&pn=ALL:::ETerryw
Discover Home Loans
[email protected]
Send an email to get my newsletter.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
“fast reply only”
I’d be very careful if you’re thinking about selling your PPoR to a trust, then renting it back as it may be seen as tax avoidance IMO
Purchasing another property though through the trust may be a ifferent sitaution, though I’d aim to buymore than one in this structure
Remember you’ll have to pay CGT when you ever sell the rental property though
“Money is a currency, like electricity and it requires momentum to make it Effective”
Online Positive Cashflow and Renovating CalculatorsWhat about if you rented it to your friend who let you stay there?
Terryw
Discover Home Loans
[email protected]
Send an email to get my newsletter.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
All a Trust does is separate ownership from control. Any activities that can be seen by the ATO as tax avoidance will be harshly dealth with.
The primary purpose of the Trust should be the Estate Planning and Asset Protection issues, with the tax benefits a “fruit for the sideboard” issue. Yes there is lots of fruit, but the ATO see right trough a rorting purpose.
[exhappy]
Geoffrey Stroud
IP Consultant
OzInvest
P: 1800 800 775 M: 0406 402 855
E: [email protected]
W: http://www.ozinvest.com.au
You must be logged in to reply to this topic. If you don't have an account, you can register here.
