OK, I have an HDT. Yes, it's a decision that I regret due to double CGT on redemption of units and the sale of the underlying property and all of the negative Tax Determinations (TD's) that keep coming out about HDTs. How I wish the ATO would pull finger release a Tax Ruling and declare an amnesty so I can unwind free of CGT and Stamps ha!
Having said all that, does an HDT still offer advantages regarding asset protection? Units on issue from the trust are considered as an asset, so your units could be taken, however most / all people with an HDT will have a loan that is the same value at the units, therefore the units are 100% financed.
One of the throw away lines many give regarding asset protection, especially for properties that are held in your own name, are to keep them mortgaged with a high LVR? By issuing units up to the same value of your mortgage, haven't you achieved the same thing?
In year one, assuming you purchase 100,000 units and have a loan of $100,000, and someone sued you and you lost the judgment, there would be nothing to take. In subsequent years, the units will grow in value, which means that you are liable for the difference in value i.e. say in year 2 your units are valued at $150,000 your loan is $100,000. Should you be sued, you'd be liable for $50K, but you still would not lose the property as you don't own it directly?
We've heard lots about the disadvantages of trusts. However in light of some of the recent ATO decisions, I'd like to start of a discussion on any remaining advantages.
In 2009, why would you use an HDT?
Having said all that, does an HDT still offer advantages regarding asset protection? Units on issue from the trust are considered as an asset, so your units could be taken, however most / all people with an HDT will have a loan that is the same value at the units, therefore the units are 100% financed.
One of the throw away lines many give regarding asset protection, especially for properties that are held in your own name, are to keep them mortgaged with a high LVR? By issuing units up to the same value of your mortgage, haven't you achieved the same thing?
In year one, assuming you purchase 100,000 units and have a loan of $100,000, and someone sued you and you lost the judgment, there would be nothing to take. In subsequent years, the units will grow in value, which means that you are liable for the difference in value i.e. say in year 2 your units are valued at $150,000 your loan is $100,000. Should you be sued, you'd be liable for $50K, but you still would not lose the property as you don't own it directly?
We've heard lots about the disadvantages of trusts. However in light of some of the recent ATO decisions, I'd like to start of a discussion on any remaining advantages.
In 2009, why would you use an HDT?