Hi all,
Firstly, happy new year.
I have a query about how I am currently transferring money to a trust (discretionary with company as trustee). At the moment I have a trust setup so that my brother (investing partner) and I can purchase IP's. We currently only have two IP's in the trust name which was setup in late 2009. We are yet to compete a tax return for either the company or trust. We setup a bank account in the trustees name and all expenses are paid for out of this account. We also have the rent going directly into this account.
Each month we both contribute (via bank transfer) a sum of money to the trust in order to meet loan repayments/expenses (they are neg geared at this stage) and also to boosts our savings to purchase the next IP.
Is what we are doing the most effective way of giving money to the trust? We are gifting the money each time by the way. Is there tax implications from doing this? Should we be keeping a diary or minutes each time we make a transfer?
Please let me know your thoughts.
Regards,
Mitch
Hi Mitch,
I'd try posting this in the Legal & Accounting forum. It's easy to get lost in the help needed area.
Andrew
itsandrew
Go as far as you can see and you will see further.
Thanks Andrew I will give it a go.
Mitch
There are tax and asset protection implications on doing this.
Firstly, if you gift to a trust it is not returnable, but can be clawed back in some instances. However, if loaned to a trust the money is always returnable to you. Therefore lending is less safe from an asset protection point of view.
But there are tax implications. If you currently have unpaid personal loans then you would probably be better paying these down first rather than gifting to a trust. But you trust needs running expenses covered, so you may be better off borrowing from a LOC and onlending to the trust. This will help your trust claim even more deductions (which may not help now, but will in future) and it will help you pay off personal debt first – saving you non-deductable interest
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
Thanks Terry,
My wife and I don't have any personal debt other than one IP which is in our name. I plan to keep this property geared as high as possible to maximise our personal tax benefits and try to get the IP's in the trust's name + geared. At the moment the money we are gifting to the trust is after tax dollars however when we use equity from our personal IP I guess we will need to LEND the money to the trust with a legitimate loan contract (i.e interest and repayments) so that we can still claim the entire deductions on our person IP loan. Am I on the right track here?
Mitch
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