Hi,
We've recently purchased property number 5 in a discretionary trust. We intended to rent it out for 6 months while we finish a reno on another property, then rent out the renovated one and start a reno on the new one.
When we done the sums, it makes more sense to rent out our current home and move into the new one while we complete our renovation on the other property.
I've been told that we can pay rent to the trust and still claim all of the deductions as though we were renting to someone else.My question is, do I need to get an estate agent to prepare a lease? What kind of documentation is required in this situation?
No need to use an agent. Just draw up your own lease or use one of the standard forms. Make sure you are renting at market rates.
BTW you cannot claim the deductions – they trust can though. If you are running a business then you may be able to claim part of the rent as a deduction.
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
Hi,
Thankyou for the info. I found the lease forms on consumer affairs web site. They look the same as our agent uses for the leases through them. We got a rent estimate from an agent and he said $180p/w as the house is a bit run down. We intend to renovate while we live there, do we need to adjust the rent on completion of the reno or would we do small increases each year? I know you can't increase the rent during the 12 months of a fixed tenancy, and on a periodic tenancy only once every 6 months.are the rules the same in this situation? Do we need to use the rent increase notice?
Thanks.For tax, just treat everything at arms length and you should be ok. Consider if you were audited, could you justify rents etc.
Legally the assets are not your's, they belong to all the beneficiairies of your trust. The trustee has a duty to act fairly towards all beneficiaries and shouldn't just favour you. So make sure the trustee can justify the decision to let you rent it and the rate charged.
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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