Hi everyone,
I am new here and I just want to get my head around some issues.
Situation:
My brother and I (B1 and B2) are trustees of our discretionary family trust, comprising
(Trustee: B1 and B2)
(Beneficiary: B1, B2, Mum, Dad)My brother and I plan to purchase a property as “B1 and B2 as trustees of Family trust” (i.e. for the trust)
What sort of tax benefits can I take advantage of?
What implications for negative gearing?Apologies for the questions being broad – I am still new to this.
There are a few issues to consider here. The main ones that spring to mind are:
1. Does the trust have any other assets or income? Discretionary trusts cannot negatively gear, they must carry forwards any losses until the trust makes a profit to offset against them. If you have other assets earning an income in the trust you can soak up the tax losses.
2. My understanding is that it is generally not a good idea to hold assets “in trust” for yourself (ie you are the trustee and beneficiary). It can cause tax issues in some cases. Also, trustees are required to act in good faith for the benefit of all beneficiaries, which may be a problem if you are also a beneficiary. Its usually recommended you set up a corporate trustee to avoid these problems.
3. Land tax – in NSW (and I assume most states have similar rules) discretionary trusts do not receive the land tax threshold meaning you are up for land tax (1.6% in NSW) on the full value of the land.
I would suggest speaking to an accountant who can sit down and discuss all these issues and your personal circumstances and objective s in detail before making a decision.
Good points raised by Mike.
If the trust deed is old you may need it to be updated.
Also depending on the wording, in NSW a change in trustee may trigger stamp duty if changing the trustee results in the new trustee becoming a beneficiary.
So, may be best to set up a new trust and start again. You trust will also get another few extra years of life – 80 years from establishment. Best to look at using a company as trustee now rather than changing later.
And with 2 trustees both will be required to give personal guarantees to a lender.
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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