Divorce Solicitor/Finance

[skater]

How can you negative gear a discretionary trust? Don't make things up. The ATO only allows negative gearing using a trust structure if it fits their strict criteria about who is entitled to income and capital gains.

For gods sake! Didn't you read where I said that I didn't explain myself very clearly? I'm not making anything up at all.

By negative gearing I meant that a trust (discretionary trust) could make a loss. I know full well that you can not deduct that against your PAYG income. The losses are quanantined in the Trust until a profit is made.

Crikey! No need to get your knickers in a twist!

 

[Aaron_C]

For gods sake! Didn't you read where I said that I didn't explain myself very clearly? I'm not making anything up at all.

By negative gearing I meant that a trust (discretionary trust) could make a loss. I know full well that you can not deduct that against your PAYG income. The losses are quanantined in the Trust until a profit is made.

Crikey! No need to get your knickers in a twist!

Why would someone do this? It makes no sense.

 

[Rolf Latham]

Why would someone do this? It makes no sense.

Many things make no sense unless they become "personal"

Different folks have different needs.

One reason may be that some prefer immediate asset protection over immediate tax benefit.

ta
rolf

 

[Aaron_C]

Anyway, the point is that discretionary trusts can't be negatively geared because losses are trapped in the trust. Skater's comment is wrong. But I digress - the original poster's question has already been answered.

 

[lizzie]

Anyway, the point is that discretionary trusts can't be negatively geared because losses are trapped in the trust.

Correct for an DT - but - a property held in a "Hybrid" Discretionary Trust can be negatively geared against PAYG income as explained in my last post.

Just because the ATO doesn't like them, doesn't mean they don't exist. I had one myself until recently.

As stated - the property is held in the trust. The mortgage against the property is in personal name held outside the trust. The HDT distributes the positive income from the property (rent less management/body corp etc - but not mortgage) ... then the income is put against the mortgage interest payments to give either a negative or positive "outside of the trust" and is added to you PAYG income.

One would think that being a mortgage broker you would understand how these operate.

 

[Aaron_C]

Correct for an DT - but - a property held in a "Hybrid" Discretionary Trust can be negatively geared against PAYG income as explained in my last post.

Just because the ATO doesn't like them, doesn't mean they don't exist. I had one myself until recently.

As stated - the property is held in the trust. The mortgage against the property is in personal name held outside the trust. The HDT distributes the positive income from the property (rent less management/body corp etc - but not mortgage) ... then the income is put against the mortgage interest payments to give either a negative or positive "outside of the trust" and is added to you PAYG income.

One would think that being a mortgage broker you would understand how these operate.

Who cares if they don't like it? Of course you shouldn't care - after all who cares if the ATO disallows all your deductions and makes you pay back tax?

 

[skater]

For the third time, I admit that I didn't explain clearly what I meant, but that does not mean that I was wrong. But, it seems that you've still got your knickers in a twist.

As a broker you should understand that there are more than one kind of Trust. Obviously you did not realise this.

 

[lizzie]

Who cares if they don't like it? Of course you shouldn't care - after all who cares if the ATO disallows all your deductions and makes you pay back tax?

What!!? Hang on. You are the one that said the ATO didn't like them and you appeared to not understand that and HDT existed because of continuing to insist that NG must be tied up in the trust.

We are just agreeing that the ATO doesn't like them and pointing out that with an HDT the dispersements from the trust can be positive even if the property is negatively geared.

So, what's the problem? Chill

 

[beachgurl]

Regardless of what type of trust the property is in or whether it is operating at a profit or loss, centerlink regards a rental property as income. The most ridiculous part is if, for, example, your property runs at a 50k loss per year, centerlink assesses your income at 50k. So I assume this would be why she wants out.

When I applied for the baby bonus I found I would've been ineligible due to my "income" being too high, having properties negatively geared 20k. How centerlink determines that a 20k investment property loss is actually 20k in your hand is ridiculous.

 

[Terryw]

Hi

Many inaccuracies in the above posts.

Centrelink can treat any trust and its asset as personal assets of an individual if they have any role or involvement in the trust, including being trustee, appointor, beneficiary, guardian or someone who controls these roles while not actually being in the position. They have a few documents on the Centrelink site explaining this.

Josko, what Kelly could do is to talk to a lawyer as if she had control of the appointor role (maybe guardian) she could sack the trustee and appoint a new one and thereby cut the husband out.

If she just wants out completely then she should talk to a lawyer about renouncing her interests in the trust. But this could be deemed as gifting the assets away and then Centrelink could still count them has being held for up to 5 years. There is also a chance that removing a beneficiary from the trust could result in a resettlement. That would mean the trust would be considered to have disposed of all its assets to a new trust = stamp duty and CGT.

She should also consider whether she has given any personal guarantees and how to get out of these.

There is also the Family Law option of going to court for a property settlement. Trust assets can be taken into account.

 

[Terryw]

Here is the legislation re " controlled private trusts"
s 1207v SOCIAL SECURITY ACT 1991
http://www.austlii.edu.au/au/legis/cth/consol_act/ssa1991186/s1207v.html