ppor in trust

[nidagirl]

Hi there,

I've been searching the forum for a PPOR in a family trust and tax deductible paying market rent to the trust. Do you need more than your PPOR in the trust to justify this setup?? In other words do I have to purchase IP's and place them in the trust?

Nidagirl

[coastymike]

Nidagirl,

It is generally not recommended that you put your main residence through a trust. Firstly note that the property will be subject to land tax. All property held in trusts are subject to land tax even if they are used as your main residence. The main residence exemption for land tax does not apply to trusts.

The arrangement you are talking about has been critised by the ATO in Taxation Ruling TR 2002/18 which denies deductions for home loan unit trust arrangements. However it is interesting to note that TR 2002/18 makes no mention of Janmor Nominees Pty Ltd so some lawyers are of the view that if the arrangement follows the exact same principles as Janmor then the arrangement will be deductible. I suggest you seek the opinion of a tax lawyer on this one. If you are willing to take the risk, some people will say Part IVA will apply but i'm personally not that concerned about Part IVA because im of the view that if Part IVA was applied to every scheme that involved a tax benefit then most trusts would be caught - anyway this is a discussion for another day. Seriously though I think it's worth considering but it has to follow Janmor to the letter. Consult a tax lawyer.

[Sim]

A family trust is not a unit trust - if those ruling apply to unit trusts specifically, then I wouldn't imagine it being such an issue for family trusts.

I agree that specialist tax advice is warranted - get a good accountant.

If you are in a high risk profession (or a business owner), then you may want to consider purchasing your PPOR through a trust for the extra asset protection. If tax savings are your primary concern, then as coastymike mentioned - you probably won't be better off buying through the trust - espeically with the lack of CGT free status (that can equal big $$ savings when you sell).

[quiggles]

Although if you've bought through a hybrid trust and can tax deduct the interest...might be worth considering.

As the others say, talk to an accountant.