Hi
I am interested in forming a unit trust with two of my colleagues to purchase an investment property. As far as I know any negative gearing from property would remain in the trust unless we borrow money to purchase units.
Recently I heard that if we form a corporate trustee and we become directors, the negative gearing can be claimed by us. Can somebody please help me to clarify this matter.
Neel
Hi there,
You will need to verify with good property accountant, but in terms of negative gearing and trusts, then what I have seen is the following:
1) A unit trust is set up with beneficiaries. When a property is bought you allocate the capital growth units and the income units to the stated beneficiaries
2) A company is set up to adminster the trust with some directors
3) The beneficiary who has the income units takes out the loan with the bank
4) This beneficiary can claim negative gearing on the difference between the income from the property and the loan amountMark
hi Neel
I don't think having a corporate trustee will change anything. Trusts can't negative gear, so you will need to work around things a bit. You can still borrow to buy units and then do it this way, but the unit holders must get all the capital gains too. you can't do the old income units/capital growth units anymore or the ATO will disallow the deductions.
you may also find it hard to find a lender willing to lend if you have a company as trustee is the loan needs to be in the unit holder's names. This is because the legal owner will be different to the borrowers.
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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