You can hear Ed Chans thoughts on this subject here:
http://ds1.downloadtech.net/cn1086/audio/1426244024136-001.mp3
http://ds1.downloadtech.net/cn1086/audio/1426244024136-001.mp3
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And once again, when you look into the detail of it, it wasn't so much the hybrid trust was the problem, when they were asked a question "When will this negative gearing become positive?", their answer was "Never". And of course, you know, what else can the tax department do is to limit the deduction to the rent because there's no commerciality.
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Now in this case, here the accountant said "No you're not ever going to get your money because its never going to get positively geared."
There is also an article at Lawcentral here
http://www.lawcentral.com.au/
Thomas Henn's Guide to Hybrids, Brett Davies Lawyers
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There's nothing at all in the ruling that states that the property will remain negatively geared. I don't know where Ed is inferring that. The ruling doesn't even suggest such a thing as a reason for denying the application. The only thing Ed could probably be referring to is that the capital is discretionary and he may not have had enough time to give a full reply in his broadcast.With 66298, all the accountant had to do was say that the investment will become positively geared at some time in the future...isn't it??? Seems pretty foolish to tell the tax office that it would never become positively geared?!
There's nothing at all in the ruling that states that the property will remain negatively geared. I don't know where Ed is inferring that. The ruling doesn't even suggest such a thing as a reason for denying the application. The only thing Ed could probably be referring to is that the capital is discretionary and he may not have had enough time to give a full reply in his broadcast.
I don't know a lot about this myself.If HDT has taxable positive cash flow in day one then the HDT should be au faire?
Then the ATO has to assess that intent/goal giving consideration to -
1. The fact that the units do not seem to have a commercial explanation for incurring the interest because the amount paid does not represent market value for income units, but it does reflect the value for a certain asset purchased somewhere else. (The big problem)
...Estate Planning - What do you mean? Is this because it is not part of your will once redeemed because nothing owned by you. How is this an advantage? It is easier to change your will than a HDT. IF you want flexibility in your estate a TT better...
...
- Asset Protection - Achieved better by a DT
- Anonymity of Assets using Corporate Trustee Achieved better by a DT
...
estate planning just not for when dead. i bought 50 acres dural in 1987 in discretionary trust. not negative geared so hybrid no issue. six year ago i trabsfer to children land. if done so in my name then tax bill of maybe $5M. capital gain was $20M. but i pay nothing. clayton utz do cloning and trustee changes. lots of work and cost lot of accounting and legal fees. maybe $100K but i save over $5M in tax. kids do pay tax when they sell but wonderful gift to them and they money from it. i perplexed why this not of benefit to people.
Shadow
Your advantages of a HDT
- Estate Planning - What do you mean? Is this because it is not part of your will once redeemed because nothing owned by you. How is this an advantage? It is easier to change your will than a HDT. IF you want flexibility in your estate a TT better, huge tax benefits if your heirs want to distribute to minors.
- Asset Protection - Achieved better by a DT
- Anonymity of Assets using Corporate Trustee Achieved better by a DT
- Flexibility – not until a DT after paying CGT which would not have applied if a DT in the first place.
- Negative Gearing – While ever negative gearing is applicable asset protection is not.
- Land Tax Threshold (except NSW/VIC) – Why would a HDT be better than DT?
Disadvantage of a HDT
More expensive to run than holding the property in your own name yet asset protection from people suing you (not from tenants) is the same while HDT in Unit stage.
CGT bill when decide to go to DT not to mention legal and accounting fees
Cost of winding up
On ATO radar
Possible problems with making a family trust election if trust makes a loss.