Cost of Trust set up tax deductible?

Discussion in 'Accounting and Tax' started by The Project Mgr, 16th Dec, 2008.

  1. The Project Mgr

    The Project Mgr Member

    20th Jul, 2006
    Hi Folks,

    In the 2007 Financal Year, I have incurred costs in purchasing the trust deed for our Hybrid Discretionary Trust (HDT), and also incurred stamp duty on the Trust deed. Properties were purchased in the name of the HDT in 2008 Financial Year.

    I have called up the Tax Office to ask whether the above 2 costs are tax deductible. I have mixed responses. One guys said the set up/deed purchase cost and the stamp duty is deductible over 5 years.

    Another person said both costs are not tax deductible because the trust is NOT engaged in operating a business. I am confused!!

    Are the costs tax deductible? and if so over how many years?

    Kind regards,
  2. Rob G.

    Rob G. Member

    10th Apr, 2008
    Melbourne, Victoria
    The cost of setting up a trust is deductible only if involved as part of conducting a business.

    e.g. Setting up a trading trust as a vehicle to conduct a business.

    e.g. Setting up a trust to look after the interests of secured lenders as part of financing a business.

    e.g. Setting up a trust to hold interests of employees in an employee share scheme as part of conducting a business.

    If you are merely investing then this formation cost is a non-deductible capital expense (black hole expense).

    I am not sure whether part of this cost could be included in the cost base of the units - I haven't really thought about it but it sounds dubious, especially for a HDT with a discretionary component. Formation costs are NOT an asset even though Accounting Standards may allow it to be reported as one !!!