HDT explanation for Dummies???

I thought the ATO will tell you in advance if your PBR is likely to be successful, why couldn't you just ask them?

GSJ
 
Mry,

What about making it for an interest only loan? Will that help the case or hinder it? It will become positively geared sooner wouldn't it, and many investors would do this anyway as it makes more commercial sense?

GSJ
Personally I'd prefer to see it as an interest only loan, and agree with GSJ that most people would probably be doing it that way.

However, it is your PBR. :)
 
Based on advice I have received, I am going to hang back from lodging the private binding ruling for now. I'll wait for confirmation of some other items before I proceed.
 
mry. why no go ahead. u say based on advice received. did u speak to ato or someone who say maybe hybrid ok. seem strange u all systems go one minute and suddenly halt the next. would like to be fly to hear who u talk to.
 
Wouldn't a principal and interest loan reduce the asset protection because the loan is being paid off, thus building equity which would be available to creditors?
 
Based on advice I have received, I am going to hang back from lodging the private binding ruling for now. I'll wait for confirmation of some other items before I proceed.

Hi secret squirrel and GSJ,

I suggest you read the bits that have been bolded. Mry isn't backing down, he's waiting for further info before proceeding.

Mark
 
Jus a question; how binding is a PBR....have the ATO ever reversed them?

Isn't there also a piece that says that - that the commissioner of taxation can declare an event as occuring that never occured or vice versa etc etc

I'm glad i'm not an accountant....my hea would explode !! :eek:
 
Lisa

i seriously suggest you sit down with your accountant and discuss the entire situation and outcome of HDT. Your investment in a HDT isnt just about saving you tax today, but setting your investing life up for tommorrow. The only way you are truly going to learn all about HDT is to sit down with a professional and let them go through all the pro's and con's of setting up one of these trusts, not only that but each individual has there own wants needs and outcomes with what they are looking for in investments.

Sharon:D
 
Hi there Sharon,

Welcome to Somersoft!

Good to have another accountant on board, and presumably another supporter of the HDT...?

Do you use MGS deeds and do you have any thoughts on calculating redemption price of special income units?

Do you have any thoughts on the PIT?

GSJ
 
Lisa

i seriously suggest you sit down with your accountant and discuss the entire situation and outcome of HDT. Your investment in a HDT isnt just about saving you tax today, but setting your investing life up for tommorrow. The only way you are truly going to learn all about HDT is to sit down with a professional and let them go through all the pro's and con's of setting up one of these trusts, not only that but each individual has there own wants needs and outcomes with what they are looking for in investments.

Sharon:D

The issue is not whether they are a valid structure, but whether people can use them to have their cake and eat it too. People are claiming to be able to do things that I see as pure and simple tax evasion with HDTs. It is not only logical but clearly the commissioner's view that you just cannot have it both ways.
My thought is that if certain people hadnt been pushing the idea so hard a long time ago, there would probably be no debate at all now, as people would not be trying to argue the egg off their faces.
Its pretty hard/pointless to argue with the "if you dont agree then you either dont understand HDT or are just being too conservative" 'argument' though. That is like reasoning with a religious nut that makes a mistake but wont admit to it or take responsibility because "God told me to do it".
I would suggest to all those who continue to debate the HDT proponents to just let them go - you will never argue or debate someone around whose mind is already made up. Either they will slip through the regulatory net and claim that because of this they are right, or they will get pinged and carry on about the injustice of it all.
 
Practical knowledge is worth much, much more than the theoritcal crap that they teach at university.
Yeah I hate accounting and tax fundamentals and business ethics also, they have no place in the modern profession.

Julia, I have readily admitted - and will continue to do so - that I am not university qualified, not a tax agent, nor have as much experience as other accountants on this forum. However, most do not hold this against me as I still understand how things work, and why.
Fair enough, but surely with such little formal education and experience there is the humility (or even common sense?) to admit that perhaps people with much more experience and education dont just pull things out of their proverbials, but may actually be coming from a more learned point of view than you are?
I have never heard about accounting prodigies - it is one of those professions where your value comes purely from experience and your practical application of that experience, not some sort of innate talent.
As such it is probably an idea to perhaps ponder the possibility experience may give a more wise and insightful point of view than brash confidence.
 
Hiya,


I would suggest to all those who continue to debate the HDT proponents to just let them go - you will never argue or debate someone around whose mind is already made up.

Interestingly, I have had a few people suggest that I treat the hardline antogonists againsts HDT's in exactly the same way. It is not just one side of this debate that is refusing to change their mind. For whatever it is worth, I am only continuing to post here to ensure both points of view are being presented.


Fair enough, but surely with such little formal education and experience there is the humility (or even common sense?) to admit that perhaps people with much more experience and education dont just pull things out of their proverbials, but may actually be coming from a more learned point of view than you are?
I have never heard about accounting prodigies - it is one of those professions where your value comes purely from experience and your practical application of that experience, not some sort of innate talent.
As such it is probably an idea to perhaps ponder the possibility experience may give a more wise and insightful point of view than brash confidence.

I am more than willing to admit that I may not know as much about some aspects of accounting as others here.

However, I believe that I am able to hold my own where required. Perhaps it is genetics, perhaps it is how I've been taught, perhaps it is the environment in which I have grown up. Perhaps, it is the 70-100 hour weeks that I have worked over the last two years to learn what I have (and I am sure I'm not the only one here with a similar workload).

An "innate talent" for learning quickly and retaining information certainly does help, too. Granted, my knowledge will only improve and develop as I become more experienced.

From what I have seen of the degree, and looking ahead to what I have left, it is basically there to create glorified bookkeepers. I do not believe it will teach me much of use that I have not already learned from being here and actually doing the work. I have met many graduates who do not know the first thing about practical accounting (and many 'experienced' accountants who do not know a lot more.)

As I have stated before, I have a very high level of respect for Mry. Even if we disagree on this particular issue, I still hold him in high regard, value his opinions, and refer clients to him where appropriate. In this instance though, I will continue to hold a different point of view based on my own research and discussions with other experts.

Cheers

James.
 
Ladies and Gents,

Perhaps the saddest part of this entire thread, titled " HDT explanation for Dummies???", is that clearly professional taxation specialists are not able to agree on much at all.

From a newbies perspective I would imagine that the tone and nature of this thread has scared them so far away that the only thing they will be left with is a property portfolio in their own name (if any at all), thereby missing any and all the benefits of any form of structure.

i.e. The constant bickering will be pushing many potential clients into the exact position that structures are designed to protect against.

While PBR's are a way of ratifying your strategy there simply never will be a right or wrong answer here. The many and varied ways in which a trust can be used, coupled with the many and varied ways which the ATO might view that use on any given day of the week totally precludes a "yes this is ok" or "no, these are no good" argument.

It simply isn't possible to document and validate the potential combinations of use and subsequent ATO view of that use and it is up to YOU, based on the advice of your professional accountant to argue your case should you ever be asked to.

I'd say you're probably all right to some extent. Depending on the user, the day of week and the phase of the moon.

Taxation is a grey area.

Ed Chan often describes trusts as being much like a hammer. Used correctly it's a valued tool. But it can also be used as a weapon.

Arguing on product releases is futile. It's a deed. There should not be an MGS vs PIT(tm) vs <insert deed here> discussion where seemingly each "professional" is using opinion to compete for business (or trying to justify their position to their clients), and consequently discounting the views of their competition, undermining their product and in so doing, undermining their profession. If anything this thread shows a lack of respect for your collective clients rather than a desire to advise and protect them (which IS your job).

I would recommend that each of you that specialise in any given taxation area limit discussion of your specialty to the 4 walls of your offices and that any potential purchaser of a structure should be investigating it with a professional at their office. Perhaps looking for a second opinion with another accountant if necessary. These arguments have a purpose but perhaps they belong under "advanced techniques/discussions", not for the feint of heart. Certainly not in response to a newbie question :)

I have an MGS deed and use GG and am both happy with the service and advice I receive from them directly. I'm sure the other accountants participating in this thread have a happy client base and look after their clients equally as well. Perhaps it might be more constructive to talk about the agreed upon benefits of a given structure for a question such as "HDT explanation for Dummies???", rather than those grey areas where interpretation leads to a state of confusion?

Cheers,

Arkay.
 
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Hi GSJ

Thanks for the welcome :) I do support the HDT, but I also believe that they should be used in the right situations, the HDT is not for everyone, each person's situation is different and therefore should be analysed on their needs for not just the immediate need, but what they are looking for in the future :)


Hi there Sharon,

Welcome to Somersoft!

Good to have another accountant on board, and presumably another supporter of the HDT...?

Do you use MGS deeds and do you have any thoughts on calculating redemption price of special income units?

Do you have any thoughts on the PIT?

GSJ

Yes I only use MGS I wouldn’t suggest anything else! They are the best quality trust deeds you can purchase today.

Thoughts on the calculation of the redemption price huh.... well that one is still up in the air as far as I am concerned; I still believe that the redemption of the price should be based on the purchase price of the income unit. The purchase of the unit was always for the intention of income only. (Although the interest deduction was also the intended result for purchase) It will be interesting to see how this one pans out in the hands of the commissioner. The MGS HDT deed is of the highest quality and therefore I feel this particular trust deed will hold up to the attacks from the legal eagles at the tax office, but after saying that let’s face it the HDT isn’t just for Negative Gearing, it’s also for the asset protection of your investment, if you went into the purchase of a HDT for negative gearing only without the knowledge of the pitfalls as well as the benefits, then you were fooling yourself. :)

The PIT! Well I am yet to setup a PIT and although I have read into the workings of them, I am still a supporter of the MGS HDT and haven’t yet had a PIT across my desk.
 
Thoughts on the calculation of the redemption price huh.... well that one is still up in the air as far as I am concerned;
How can you support it yet the sticking point of the whole debate is "up in the air"??

but after saying that let’s face it the HDT isn’t just for Negative Gearing, it’s also for the asset protection of your investment
Come on, at least be honest - the whole point of the HDT is to negatively gear in one persons name then shift any positive gearing into another persons name while avoiding the capital gain implications. Dont run the "asset protection" rubbish! There are far easier and simpler ways to achieve asset protection than this borderline (at best) method.
Fair enough if you want to run the "pro HDT" argument, until there is definitive direction by the courts at least there is an argument there, but at least call a spade a spade and dont claim some more pure primary purpose!
 
While PBR's are a way of ratifying your strategy there simply never will be a right or wrong answer here.
PBRs are to confirm the tax treatment of your strategy, they do not ratify it. You can't make up your own mind on what the tax treatment will be. And there is a right or wrong answer with regards to the question - "Can you negative gear or not?"

I'd say you're probably all right to some extent. Depending on the user, the day of week and the phase of the moon.
Either HDT users who negative gear are sitting on a potential time bomb or they are far ahead of the tax office on this one. My clients deserve to know what they are sitting on.

Taxation is a grey area.
...when you don't know what you are doing.

Arguing on product releases is futile.
Wrong. When PBRs come back and state that the HDT does not work (66298), we get the "Oh, but that was an inferior deed so of course it doesn't work", then we have discussions on the relative merits of the deed itself.

If anything this thread shows a lack of respect for your collective clients rather than a desire to advise and protect them (which IS your job).
Its the other way around. We show a lack of respect to our clients when we allow people to make unsupported claims without pointing out the faults and trouble areas. For example, when Henry Kaye part 2 comes around to my clients, you can bet I'll be warning them because I "desire to advise and protect them", which is an active response, not a passive response.

I know my job and do it very well Arkay. If I approached my job the way you advise Arkay, I would do an extreme disservice to my clients.

And for Julia, there is one accounting association that does sell structures, the NTAA through Interprac. Hmm, there's a little box called "Hybrid trusts" on the right, I wonder where that goes?
 
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