Re: Net Distribution by Hybrid Trust

[nesta]

My thought as:-

Scenario like:-

1) 2 individuals loan $300,000 from the bank and buy back 50% each of special income unit from the Hybrid Trust.

2) 2 Family Trusts have 2 corporate trustees each.

Can the Hybrid Trust distribute the net profit (if any) to the following beneficiaries:-

100% Capital Gain to individuals only
100% Rental Income and all other income to the other 2 Trusts.

In doing so, as an individual can enjoy the negative gearing while distribute profit to the other Family Trust.

Have I added too much trouble to myself? E.g. administration costs and time.

Thanks.

[alexlee]

1) 2 individuals loan $300,000 from the bank and buy back 50% each of special income unit from the Hybrid Trust.



why are the individuals PAYING the hybrid trust? The TRUST buys back the income units from the INDIVIDUALS, no?
Alex

[GreatPig]

Depending on the wording of the trust deeds, I think technically yes, but I believe the ATO are currently scrutinising the use of HDTs where capital gains are distributed to other than the unit holder, and disallowing full interest deductions in some cases.

What's the benefit though of distributing from one trust to another, unless perhaps the other trust has losses to offset? The income distributed to that other trust then has to be distributed to some individual or company.

Just my understanding, etc. Seek your own professional advice.

GP