Buying via a trust
- Thread starter LoneWolf
- Start date
DT, we are buying under a discretionary trust (company trust), where we are the trustee of this company
My understanding is that the Trust claims the depreciation and can use it to reduce it's income.
based on this, depreciation is still applicable to reduce its income (rent collected), right?
However, under trust system, you cannot negative gear, is that right?
Yes and No. It can negative gear it's Trust income NOT your personal income.
There is one type of Trust where you can negative gear your personal income but it's not very common. I'm trying to remember it's name. ummmm darn it sorry - but it's not a discretionary trust.
Think of the trust as a third person, but they are a puppet and you control them.
That third person owns the property, you don't.
The third person will also get all the normal tax deductions associated with any property they own.
As the puppeteer, when they make an overall profit, you take it away from them. If they make an overall loss however, you're expected to cover that loss.
That third person owns the property, you don't.
The third person will also get all the normal tax deductions associated with any property they own.
As the puppeteer, when they make an overall profit, you take it away from them. If they make an overall loss however, you're expected to cover that loss.
Hybrid Discretionary Trust.
Don't even go there. Without making a lot of phone calls, I can only think of two lenders that are still openly funding them.
Hi PT,
Thanks for your clarification
Therefore Depreciation is applicable to reduce income (rent collected)
However, you cannot negative gear your personal income, even though your the trustee of this trust.
Thanks for all the advice
You can't negative gear against the trustee's income, but you can negative gear against other income that the trust might earn, such as dividend income from shares (probably not a great example because there's usually franking credits involved to make it complicated).
In most cases with trusts, the negative gearing effect results in losses. These losses are held within the trust until it makes profit at which time they can be used to reduce the taxable profit.
In most cases with trusts, the negative gearing effect results in losses. These losses are held within the trust until it makes profit at which time they can be used to reduce the taxable profit.
No you're not the trustee, the company is.
Ok PT, understood.
I shall proceed with depreciation with Scott to reduce income earned.
Ok, sorry for my ignorance on this matter
So, I am buying under xxx PTY LTD, where XXX family trust is the trustee.
Am I not the trustee here?
Buy the property as "abc pty ltd as trustee for xyz family trust"
xyz family trust is the trust
abc pty ltd is the trustee
Buy the property as "abc pty ltd as trustee for xyz family trust"
xyz family trust is the trust
abc pty ltd is the trustee
oh... But it is ultimately ABC PTY LTD buying the property?
Not really, the company is buying it as the trustee for the trust. It's a fairly vague distinction, but it is important.
You don't actually need a company to be the trustee, it can be done as an individual. You can buy the property under, "LoanWolf as trustee for XYZ Trust". There's a lot of reasons why you shouldn't do this though.
You don't actually need a company to be the trustee, it can be done as an individual. You can buy the property under, "LoanWolf as trustee for XYZ Trust". There's a lot of reasons why you shouldn't do this though.
It's the other way around. The Pty Ltd is the Corporate Trustee for the Family Trust.
Most likely you are Directors of the Trustee but you are not the Trustee if you have a corporate Trustee for the Trust
Mail from my lawyer and explanation
"You guys are directors and shareholders of the company ABC Pty Ltd. The company is the trustee of the XYZ Family Trust.
Whilst the property will be registered in the name of the company, the property is in effect owned by the trust. As the trustee, the company is merely holding the property for the beneficiaries (i.e. trust relationship)."
"You guys are directors and shareholders of the company ABC Pty Ltd. The company is the trustee of the XYZ Family Trust.
Whilst the property will be registered in the name of the company, the property is in effect owned by the trust. As the trustee, the company is merely holding the property for the beneficiaries (i.e. trust relationship)."
I am buying under a company due to development opportunities with this purchases. Apparently there are legal, protection and tax benefits
I am hoping to become a L plate developer
