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Yes, I understand that. So if the deed has Paul as the only beneficiary, but an independent appointor (eg accountant, lawyer), and a corporate trustee with multiple directors and shareholders, is it possible to achieve both negative gearing and asset protection with such a Trust?It is not a question of what you actually do it is a question of what the deed could allow you to do
Yes, I understand that. So if the deed has Paul as the only beneficiary, but an independent appointor (eg accountant, lawyer), and a corporate trustee with multiple directors and shareholders, is it possible to achieve both negative gearing and asset protection with such a Trust?
I'm genuinely curious, not trying to score any points. I don't have a dog in this fight.
Thanks, Rob, that sounds pretty clear then - you get to choose negative gearing or "asset protection and discretion in distribution", but can't have both, which seems entirely reasonable.There is no asset protection for unit holders.
The various indicia (in tax case law) of what is income and what is a capital gain would probably be applied, and not the wording of a trust deed.
Ebbie,
I would be concerned about claiming a deduction for interest incurred in the earning of income where that income was actually capital gains re-classified to be income by virtue of the wording of a trust deed. Would want to consider the mechanism by which capital gains are classified as income very carefully.
Ebbie,
If you think your hybrid is not caught by the ATO's ruling then you need to ask yourself why did you choose to use a hybrid.
So does this mean I should not consider using a hybrid trust at all? or only use a hybrid trust that has been worded accurately?
... The main reasons for setting up a Hybrid Trust for me were asset protection and the ability to negative gear, as well as the flexibility and other benefits associated with using trusts. The end goal was always to redeem the income units as soon as possible and operate the trust as a normal discretionary trust once the property became cashflow positive (and I no longer needed the negative gearing). ...
Thanks for the reply Gordon, I was starting to feel very alone.Yep, probably the same scenario for quite a few of us back then unfortunately.
I actually got a very low valuation last year which would have worked in my favour had I been able to go through with the redemption. I could have got out of this mess with very little capital gains tax. Unfortunately the longer I have to wait the worse it's going to be.Amusingly an advantage I see put forward is that a HDT is great if your property's value is in a loss situation you can then redeem the units and revert to a discretionary situation.
... I actually got a very low valuation last year which would have worked in my favour had I been able to go through with the redemption. I could have got out of this mess with very little capital gains tax. Unfortunately the longer I have to wait the worse it's going to be. ...
This is what can happen when one deviates from the "keep it simple" time tested structure approach