Buying PPOR under a trust with CGT exemption

[ladobs]

gift and loan strategy

The gift and loan back strategy is worthwhile looking at as tubs is alluding to. Such a loan should have a mortgage registered against the title to prove it is an honest to goodness agreement, but beware of property increases that may take place later. Queensland is getting rid of mortgage stamp duty on 1 Jan 2009 so I'm sure a lot of people will be doing this around that time.

This sounds really interesting. I have a friend who is concerned over asset protection on his personally held PPOR. Can anyone pleae explain a bit further for us slowies!!

Trying to get my head around:
If the PPOR owner loans $ and gifts to trust. Why is trust then taking out 2nd mortgage over the PPOR?

 

[sailor]

Hi Gang,

One question I have raised a few times now but have never received any responses to is that if you want to live in a property owned by your Disc Trust then according to some accountants unless you pay rent you will have to pay Fringe Benefits tax. Anyone like to comment on why Fringe Benefits would need to be paid in this situation?

Cheers - Gordon

I'm not an expert, but my logic tells me that as the beneficiary I'm entitled to the proceeds of the trust...and these proceeds are officially income for me. So like any job where I'm being paid an income, if they throw in a house or a car "for free", someone has to pay the FBT. The relationship is then like employer/employee.

If however, I pay rent to an entity...any entity for use of something, then our relationship is tenant/leasee.

So I suspect the answer lies in the nature of the relationship between the person living in the house and the owner of the house.

 

[Ebbie]

Hey Ebbie,

Do you get kick backs for advertising that ha ha

Obi

No, but anyone thinking of buying it please mention my name and see if you can organise a commission for me. Thanks.

I was actually hoping someone who had already bought it could answer my question but I think I might have to buy myself a copy. The speed in which tax laws change means the 2003 version will probably be way out of date by now!

 

[Horizon]

'The Tax Office are currently looking at unit trusts owning your home, but, have shown no real interest in family trusts doing so since they lost an important court case in the 1980's.

One piece of magic to this idea is that providing you pay rent to the trust at commercial rates, the trust will be able to claim the interest on the mortgage and all the usual bills relating to property investment as legitimate tax deductions without triggering the nasty consequences of Fringe Benefits Tax.'

This is from my original copy of Trust Magic published in 2003. I haven't bought the updated Oct 2007 version yet so I don't know if Dale's view has changed since then. Can anyone confirm it is still in the new publication?

Hi Ebbie,

This is still in the Oct 2007 version.

Cheers,
Horizon

 

[Pete]

Claim losses only to neutral position, not NG

The CGT exemption question seems to have been answered.

It was explained to me, and I may not have fully understood, that having the PPOR in a trust was OK so long as one didn't claim a loss. So one can't negatively gear, but could claim deductions up to the value of the income (rent) - to a neutral position. And the rent was a book entry I think?

Howzat?

 

[Ebbie]

Hi Ebbie,

This is still in the Oct 2007 version.

Cheers,
Horizon

Thanks.