I was wondering how depreciation is dealt with between a unit trust and a SMSF. I am setting up a unit trust to buy a property for my SMSF. The property will cost $240K plus costs. I will issue the appropriate number of units so that each unit costs $1. The property will generate about $16K pa income less costs eg rates, insurance maintenance etc. There will be no borrowings. I expect a nett income of around $10K pa. This will be transferred annually to the unit holders as per the deed. ie to my SMSF. How is depreciation treated in this situation. Can the depreciation be passed from the unit trust to the SMSF for tax purposes?
Depreciation cannot be transferred. Owner of the property – from a tax point of view = the unit trust will be able to claim all expenses and make a distribution to the unit holders.
Have you sought advice on this set up and are you sure it is a good idea?
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
No I have not sought advice and I am not sure it is a good idea. I am open to any advice. We have the cash in the SMSF and wish to buy property with the money. We have one other property in the SMSF as well as a couple of other income producing assets. We have two companies and a family trust. My plan was to isolate the new property from other assets by the use of a fixed unit trust. From what I have read, as long as the trust is 13.22C compliant this strategy is OK. Is there a better way?
Why separate the property from the other assets of the SMSF? You’re paying cash and the other assets in the fund shouldn’t be risky enough to jeopardise the property
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