HDT explanation for Dummies???

Thanks for the kind and gentle introduction into the somersoft forum, I must say if your on the welcoming committee it was very sweet of you with your kind words.
How can you support it yet the sticking point of the whole debate is "up in the air"??
Yes I DO support the HDT however with so many badly written trust deeds out there; yes I believe the whole debate is up in the air. Not everyone was lucky enough to have an accountant or solicitor who uses the MGS HDT deed. So yes it is still a very hot topic and some people could be badly burned because of their choice in trust deed.
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. Don’t 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 don’t claim some more pure primary purpose!

I didn’t realise you had trialled the HDT deed in a court of law to see if the asset protection is available. I however believe on this point you are incorrect, as a HDT does have the "Discretionary" powers, the capital within the trust can be distributed as the trustee sees fit, therefore the assets of the trust would be "correct me if I am wrong" protected from a legal attack.

The HDT does cover many different angles and that is why it is so popular, it not only gives you the great advantages of being able to negatively gear, it also protects your assets. If the only reason a person set up a HDT is to get the advantages of Negative gearing, then they didn’t consider the whole picture.
 
i think tax is grey whether u know what doing or not. i remember QC saying person once said lets simply trust tax law. he said response was they said the same as mathematics. to simplify they say let pi be 10/3. well we know what happen. not simple.

same as tax. if no grey bits then why so many tax lawyers. it is grey and many QC and SC fighting cases because of grey. Maybe small end of town not see it but i see QC every week for things and they always in court for tax. not me though which is good. maybe one day.
 
Thanks for the kind and gentle introduction into the somersoft forum, I must say if your on the welcoming committee it was very sweet of you with your kind words.
No worries! you should however have claimed the 30 day special introductory "Public Comment Criticism Free" offer though!

Yes I DO support the HDT however with so many badly written trust deeds out there; yes I believe the whole debate is up in the air. Not everyone was lucky enough to have an accountant or solicitor who uses the MGS HDT deed. So yes it is still a very hot topic and some people could be badly burned because of their choice in trust deed.
I would think that this "up in the air" issue of unit price valuation will be resolved across the board (regardless of Trust Deed wordings) when the matter hits court for the first time.

I didn’t realise you had trialled the HDT deed in a court of law to see if the asset protection is available. I however believe on this point you are incorrect, as a HDT does have the "Discretionary" powers, the capital within the trust can be distributed as the trustee sees fit, therefore the assets of the trust would be "correct me if I am wrong" protected from a legal attack.
True, but no one can intelligently argue that the primary reason for setting up such a complex and unproven structure is asset protection when there are far simpler ways to achieve this, so in my view asset protection it a null argument in this case. The SOLE PRIMARY reason people set these HDTs up is to a) get the negative gearing in the highest income earners name and later the positive gearing in the lowest income earners name and b) to avoid capital gain implications. To argue that asset protection plays a part is like arguing that you are investing in forrestry schemes because you honestly believe that you will get the best risk/return outcome out of these investments
 
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!

Ditto, hit it on the head!!!!!!....and the Asset Protection is usually just to get around the sole or dominant purpose test. Usually an accountants "out" for when the ship hits the fan.

Please don't be offended if I/we disagree with you.


Cheers
 
I've been reading this thread with interest. I'd like to put forward the following scenario for everyone's comment:

HDT for single self-employed person with no offspring, who wants to protect assets.
 
You might have to add "wants to negative gear" to that Sailor. Otherwise a discretionary trust will do the job for asset protection (plus it's been tested in the courts).
 
...a discretionary trust will do the job for asset protection (plus it's been tested in the courts).

I wonder if this is the type of trust that most politicians use? I've read that 90% of politicians use family trusts for their business interests and investments.
Does anyone know if any politicians use HDT's?
 
True, but no one can intelligently argue that the primary reason for setting up such a complex and unproven structure is asset protection when there are far simpler ways to achieve this, so in my view asset protection it a null argument in this case. The SOLE PRIMARY reason people set these HDTs up is to a) get the negative gearing in the highest income earners name and later the positive gearing in the lowest income earners name and b) to avoid capital gain implications. To argue that asset protection plays a part is like arguing that you are investing in forestry schemes because you honestly believe that you will get the best risk/return outcome out of these investments

Sorry I went away for a long weekend and only just got back yesterday :)

You are correct, I wouldn’t suggest a HDT for asset protection only.... although touché on your trees suggestion :) in every post I have said it is only a CONSIDERATION and although the HDT has not been tested in court it is a major consideration, because lets face it, if your an investor and you don’t protect your assets what is the use of investing... if someone could take it away at a blink of an eye....

the purchase of the "Special income units" is just that, you purchase the units for the income only.... lets just say... it is SIMILAR (not the same) as investing in a fixed interest or say debenture, you are not expecting a capital return, instead you are understand you will only receive income from that unit..... ignoring (yes I am saying ignore) you are ONE of the beneficiaries of the trust, you have purchased those units expecting income only, (NOT CAPITAL) therefore you understand the whole investment BEFORE you purchase the "Special" income units.... the only "REAL" differences are that you are not at arms length and its not a set time (i.e. a debenture has a set time limit for redemption) whereas a HDT does not have a set time limit.

As it stands in Australia today, there is no tax or legal implications to investing in a HDT.... and just like Aliens there are lots and lots of innuendo but no real fact.....

I don't believe the tax office will have a leg to stand on in this fight, there are too many good lawyers and the like in the corner of the tax payer.... but lets face it, its just my opinion :)
 
I've been reading this thread with interest. I'd like to put forward the following scenario for everyone's comment:

HDT for single self-employed person with no offspring, who wants to protect assets.

I dont know, you obviously havent been in a bad relationship with someone wanting to take a share of your assets because they have spent some of their life (regardless how short that may be with you)

As a single person you should understand the need to want to protect your assets from anyone who feels they should have a portion of those because they spent some time with you (regardless how short that time maybe)

:) Sorry single woman with kids who has been burnt before talking here
 
I wonder if this is the type of trust that most politicians use? I've read that 90% of politicians use family trusts for their business interests and investments.
Does anyone know if any politicians use HDT's?

Not sure if politicians use HDT's but i do know the use the family trust :)
 
I dont know, you obviously havent been in a bad relationship with someone wanting to take a share of your assets because they have spent some of their life (regardless how short that may be with you)

As a single person you should understand the need to want to protect your assets from anyone who feels they should have a portion of those because they spent some time with you (regardless how short that time maybe)

:) Sorry single woman with kids who has been burnt before talking here

Correct...I acquired the majority of my assets after leaving the bad relationship. However, being in an industry open to litigation, I think my assets are more protected in an HDT than in my own name.

Regarding protection of assets for SWWK's ... would a pre-nup or cohabitation agreement protect assets better than an HDT?
 
... I don't believe the tax office will have a leg to stand on in this fight, there are too many good lawyers and the like in the corner of the tax payer.... but lets face it, its just my opinion :)

Hi Sharon,

Thanks very much for your interesting posts.

The only problem with the above is whether we can afford to pay these good lawyers. It takes a brave person to take on the ATO and I shudder to think of the costs involved if taken to court.

Perhaps a combined fighting fund could be an option. There are quite a few people around now with MGS HDT arrangements. It would only take one single MGS HDT investor (assuming standard use of Unit issue arrangement) to lose the fight against the ATO and all other MGS HDT users would be in deep trouble.

And if the ATO did decide to choose a MGS HDT tax payer as a test case it would be interesting to see if MGS would assist in the fight and what fees would be involved!

Cheers - Gordon
 
Hi

Smart person protecting your assets especially when your single :)

Correct...I acquired the majority of my assets after leaving the bad relationship. However, being in an industry open to litigation, I think my assets are more protected in an HDT than in my own name.

Regarding protection of assets for SWWK's ... would a pre-nup or cohabitation agreement protect assets better than an HDT?

I would suggest a pre-nup or cohabitation agreement to protect your assets regardless of which trust you use. However, as i said earlier the HDT has not been tested in a court of law so the best idea would be to cover all bases to protect yourself.

I hope that helps :)
 
Hi Sharon,

Thanks very much for your interesting posts.

The only problem with the above is whether we can afford to pay these good lawyers. It takes a brave person to take on the ATO and I shudder to think of the costs involved if taken to court.

Perhaps a combined fighting fund could be an option. There are quite a few people around now with MGS HDT arrangements. It would only take one single MGS HDT investor (assuming standard use of Unit issue arrangement) to lose the fight against the ATO and all other MGS HDT users would be in deep trouble.

And if the ATO did decide to choose a MGS HDT tax payer as a test case it would be interesting to see if MGS would assist in the fight and what fees would be involved!

Cheers - Gordon

Hi Gordon,

You are right the costs would be considerable; I believe that if this does go to court the best idea would be to get a fighting fund going with so many people out there with the HDT I don’t think there would be any difficulty in raising money. I also believe if the MGS HDT deed was the test case that MGS would have some input into the fight.

I myself have quite a few clients with the HDT who would be hurt badly should the outcome go against us. The problem now is having someone willing to go in and take the attack with the trust deed. The census at the moment is to sit back and see what the tax office has to say first before we jump head first into the fight.

It will be interesting to see what eventuates :)
 
The ongoing discussion of HDT

I see the discussion about HDT's has continued to split the forum since I last visited a couple of months ago. As a proponent of HDT's and HUT's, I like some of the other HDT investors have put my money into a Hybrid structure with my eyes open.

Many years ago my then accountant disagreed with me setting up a self managed super fund (SMSF) and purchasing units in a unit trust which was used to purchase the first of two business properties that my Business operated from. At the time although SMSF super funds were prohibited from borrowing to invest, there was no law that prohibited you super fund from purchasing units in a unit trust. That then allowed us to use the funds as a deposit to purchase the first of two business properties.Yes the laws were subsequently changed around 1999 but anyone who already had the structure was grandfathered and is allowed to have borrowings until 2009:D

The lesson I learned from that exercise was to do your own due diligence. Just because someone is an accountant or an accounting body and the consensus view is that HDT's do not meet the spirit of tax law..... that does not mean that all HDT's contravene the tax act. Not all private rulings with HDT's have gone against the investors. Clearly there is a significant amount of grey. The take home message is like any investment make sure the numbers stack up.;)
 
I've been reading this thread with interest. I'd like to put forward the following scenario for everyone's comment:

HDT for single self-employed person with no offspring, who wants to protect assets.

how do you intend to protect from the richstar case ruling and its implications
Even the asset protection of normal discretionary trusts is up in the air
if you are director, or appointor

For full asset protection you need other people in those roles
 
how do you intend to protect from the richstar case ruling and its implications
Even the asset protection of normal discretionary trusts is up in the air
if you are director, or appointor

For full asset protection you need other people in those roles
I'm not aware of this ruling...do you have a reference so I could read it please?
 
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