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I would think that if the funds are your own personal after-tax money, then you can do what you like with them. The issues arise when you're trying to claim some sort of deduction or whatever. GP

As Bort suggests, even if the funds are reinvested, they still have to be distributed to someone first, on paper at least. This means that the unitholder would have received a $5K distribution, which they'd have to add to their taxable income. And as Bort states, what they did after that to get...

Then it seems that Bort would be correct if units are redeemed at the market value of the assets they are attributed to. The unitholder would effectively pay CGT on the unrealised capital gain of the asset, by virtue of it being reflected in the value of the units, and the same gain would later...

Hi Dale, If it redeems for higher than the issue price though, would that be considered a capital loss to the trust that could be offset by other capital gains on the sale of assets? In some ways it would be similar to the trust short-selling units and covering at a loss. Cheers, GP

Actually I don't believe I did say that. I was just pointing out some reasons as to why that might be seen as a valid argument. Compared to an ordinary DT you mean? Well at least you can negatively gear with an HDT, and the unitholder's circumstances might have changed by the time the capital...

I think that would happen simply because of the amount paid to buy back the units. For example, if you paid $100K for the units and later the trust paid $200K to buy them back, then the trust would effectively have a $100K capital loss. This would presumably be offset against capital gains...

An unfortunate loss to the forum. IMO, yours have been amongst the most informative and well-thought-out posts on the forum, and while perhaps not amongst the most prolific, certainly amongst the most valuable. So many thanks for your contributions so far. Cheers, GP

Sacre Bleu! :eek: Can't accountants be struck off for that sort of thing?? :D GP

My concern about how the ATO would consider the redeeming of units before the asset sale wasn't specifically about the redemption, but rather about the allowing of an interest deduction prior to that with the possible expectation that the income forgone might be made up with CG later - something...

Doing it's not the problem, it's borrowing money to do it and trying to claim an interest deduction that raises issues. If the ROI was less than the loan interest, and there was no chance of capital gains, why would you do it? Especially if you also followed the idea that income can be...

Hi Dale, I think the point is though that if their only reason for setting up the trust and buying income units was earning income, why would they do it? Where's the commercial benefit? They could just as easily earn the income in their own names without the overhead of the trust. And it would...

That's something of a worry. If every use of a trust other than earning income is "private purpose", then the only acceptable intention for setting up the trust and buying income units is earning income if you want 100% interest deductibility. But one has to wonder what's the commercial...

I'll have to read my trust deed again to see if that's what it really means by attributable income. I can see a potential problem with that, in that the unitholder's ROI would then match the percentage yield relative to market value of the asset. As this has some long-term average that is...

My suggestion would be that once it's cashflow positive, the trust would redeem all the units by borrowing itself, thus creating the loan in the trust with no SIUs on issue. Then the surplus cash could be distributed discretionally. However, if you apportion income based on the price paid for...

Thanks, guys. My SIUs state that the unitholder is entitled to the value of the units at redemption, provided it is not less than what was paid, but doesn't say anything about how that value should be determined (from memory, I think the trust deed says it's up to the trustees' absolute...

Hi Dale, Thanks for that. I don't know how the proper market value would be calculated either, but in the case of where the income units are used to purchase a single IP, I would assume that they would at least have to be worth the current market value of the IP. In which case redeeming them...

Mry, Thanks for mentioning that IT 2684. It made for interesting reading (under the circumstances - generally it would be quite boring :D). I don't know how you concluded that (the bold part) from what's written in IT 2684. Here are a couple of other extracts from that document: Both of...

Not entirely capital protected. If the IP got sold for a significant loss, the trust may not be able to buy back the units. The absolute amount shouldn't decrease on average, only the percentage of the total amount. So if the property doubled in value, only half the rent would then be...

Hi Dale, Thanks for your response. Does that also mean they would be concerned about the trust redeeming the units immediately prior to selling the assets? Seems to me that would be the logical thing to do to distribute the CG to someone else. Cheers, GP

I've just been doing a bit more research, this time through some documents from Chris Batten's website (I subscribed for a few months when I originally started doing this). While various documents often just mention "capital", rather than specifically "capital gains", I believe the former is...