Renting from a Trust

[Way up North]

HI all,

I'm thinking of setting a HDT for our IP. I live in company provided accommodation and don't have a PPOR. I'm trying to forward plan as to whether it would be prudent to rent or move into one of my investment properties and use this as my PPOR ?
Any thoughts.....

[agent007]

HI all,

I'm thinking of setting a HDT for our IP. I live in company provided accommodation and don't have a PPOR. I'm trying to forward plan as to whether it would be prudent to rent or move into one of my investment properties and use this as my PPOR ?
Any thoughts.....

Many people rent from their own trust. As far as I know, the main conditions to be safe with ATO are:

1/ Have a valid comercial reason to do that and

2/ Pay market rent to the trust.

There are people here that could explain this better.

Regards,
James.

[geoffw]

If you already have an IP, and want to move it into a trust, it will probably incur an effective sale. This would mean you would be liable for stamp duty as well as Capital Gains Tax.

That's an expensive move, but I know that some people have done it.

[Michael Yardney]

Many people rent from their own trust. As far as I know, the main conditions to be safe with ATO are:

1/ Have a valid comercial reason to do that and

2/ Pay market rent to the trust.

There are people here that could explain this better.

Regards,
James.

Its a great system, I can wholeheartedly recommend it, but it must be documented properly and you must pay a commercial rent (not deductible)
Hopefully you never will, but if you eventually sell your property you don't get teh capital gains tax exemption for your PPof Residence.

[geoffw]

Hopefully you never will, but if you eventually sell your property you don't get teh capital gains tax exemption for your PPof Residence.An excellent point Michael. I hadn't thought of that.

Many investors would regard the PPOR as the on eplace they would sell at a pinch- the CGT exemption being a great motivation.

[GreatPig]

you must pay a commercial rent (not deductible)
Would I be right in saying though that if you also have a loan in your own name for the property (assuming neg geared) then the trust would just distribute that rent (after costs) back to you via the income units, whereby you'd use it to offset the loan interest and thus pay no tax on it?

If that's right, then it would effectively make the rent tax deductible.


I just saw a comment elsewhere that indicated you can't rent your own IP from a unit trust, as the ATO won't allow personal negative gearing of the place you're living in. I assume this would also apply to an HDT, in which case the above comments wouldn't be correct.


GP

[agent007]

Hopefully you never will, but if you eventually sell your property you don't get teh capital gains tax exemption for your PPof Residence.

Thus, even if you don't get capital gains tax exemption, it doesn't necessary mean that you have to give it all to ATO. You could e.g. invest in agricultural projects (with ATO private rulling approval) and deduct 100% of the investment in that same year you'd have to declare CG. In doing so, you 'll end up with the money and more investments... You could also leverage on the agricultural investment and have more money for other things..

Regards,

James.

[Jas]

Hopefully you never will, but if you eventually sell your property you don't get teh capital gains tax exemption for your PPof Residence.

Hmm ... doesn't Dale say something about signing a long lease with your trust, then you have a interest in the property and don't pay CGT.

Do a search, he's mentioned it a few times.

Jas