Vacant Land and Hybrid Trust

[NormH]

Hi all,
as I understand the world, as an individual, I purchase a vacant block of land with the intention of putting a house on it for rent in the future? say 6 mths.

That being the case then all my holding costs ie interest are not claimable as a deduction until the house is ready for rent.

Now if I do the same above but via a Hybrid Discretionary Trust, borrow the money loan it to Trust etc. Can I then claim the interest as a deduction? even if it took the trust 12 mths?? 2 years to build the house.

I see it really as no different to purchasing shares (passive investment that gave me no dividend income) with the possible expectation of some capital growth in the future.

thanks for thoughs and comments

regards

Norman

[cheffong]

HI THERE,

I HAVE JUST SET UP A HYBRID TRUST. FOR YOUR INFO, YOU CANNOT CLAIM INTEREST EXPENSES E.T.C AGAINST YOUR TAXABLE INCOME IF YOU SET UP A DISCRETIONARY TRUST.

HOWEVER, YOU CAN CLAIM IF YOU SET UP A HYBRID TRUST, OR HYBRID DISCRETIONARY TRUST. THE DIFFERENCE BETWEEN THE TWO, ARE THAT A HYBRID TRUST HAS THE POWER TO ISSUE UNITS. THIS IS BEEFICIAL IF AN INVESTOR WANTS TAKE ADVANTAGE OF NEGATIVE GEARING WITH TRUSTS.

REGARDING YOUR LAND, IF YOU CAN'T AFFORD TO BUILD YET, & YOU CAN AFFORD TO SERVICE THE DEBT, THEN YOU CAN SIT ON YOUR LAND UNTIL YOUR READY. ULTIMATELY ITS LAND THAT APPRECIATES, WHILE YOU DEPRECIATE THE COST OF THE HOUSE DOWN TO NOTHING. HOWEVER, IN ORDER FOR YOU TO KEEP ROLLING ON, YOU WILL NEED THAT TENANT IN COMBO WITH THE TAXMAN TO HELP YOU TO BECOME WEALTHY.


REGARDS CHEFFONG

[cheffong]

SORRY,

I DIDN'T READ YOUR QUESTION PROPERLY, I'M HALF SLEEP!. YOUR RIGHT, THE HOUSE HAS TO BE BUILT BEFORE YOU CAN CLAIM. AS WITH THE HYBRID TRUST, I DO NOT BELIEVE IT IS ANY DIFFERENT.


CHEFFONG

[DaleGG]

Hi

Yes, you can claim the interest on the loan used to buy units within the hybrid trust - even if the trust buys vacant land with the expectation of building on it.

The important authority in this matter is referred to as "Steele's case" and this has created quite some certainty with regard to the tax deductibilty of interest on loans to acquire vacant land.

Dale

Originally posted by NormH
Hi all,
as I understand the world, as an individual, I purchase a vacant block of land with the intention of putting a house on it for rent in the future? say 6 mths.

That being the case then all my holding costs ie interest are not claimable as a deduction until the house is ready for rent.

Now if I do the same above but via a Hybrid Discretionary Trust, borrow the money loan it to Trust etc. Can I then claim the interest as a deduction? even if it took the trust 12 mths?? 2 years to build the house.

I see it really as no different to purchasing shares (passive investment that gave me no dividend income) with the possible expectation of some capital growth in the future.

thanks for thoughs and comments

regards

Norman

[djsherly]

Originally posted by DaleGG
Hi

Yes, you can claim the interest on the loan used to buy units within the hybrid trust - even if the trust buys vacant land with the expectation of building on it.

The important authority in this matter is referred to as "Steele's case" and this has created quite some certainty with regard to the tax deductibilty of interest on loans to acquire vacant land.

Dale

If any of you are curious - the case (presumably) is

Steele v Deputy Commissioner of Taxation [1999] HCA 7Steele v Deputy Commissioner of Taxation [1999] HCA 7 (http://www.austlii.edu.au/cgi-bin/disp.pl/au/cases/cth/high%5fct/1999/7.html?query=%7e+steele+s+case)

C

[NormH]

Thankyou one and all for your thoughts.

It has started me thinking as to possibilities now.

regards

Norman