Hybrid Trusts, Family Trusts - negative gearing deductions?

[thesuperman]

I'm wondering how a Hybrid Trust or Family Trust would be able to get negative gearing deductions as per this link: http://www.taxintelligence.com.au/propertyinvestor.html

Hybrid trusts are the "in thing" at the moment.

The idea is this. One problem with buying a property in a family trust is that you usually can't claim your negative gearing deductions (I say usually because there is a unique Tax Intelligence™ trick that we use, that is perfectly legal, that may be able to get you your negative gearing deductions, depending on your situation.)

Many accountants say to solve this problem, you just buy your property in a hybrid trust. In a hybrid trust, you do not own the property, you only control it (giving you asset protection), and you are entitled to get all the income from the property.

In effect, what happens is you end up claiming your negative gearing deductions.

We can tell you for a fact that if most hybrid trusts were audited by the Tax Office, they wouldn't have a hope in hell of standing up. They would be struck out as a tax avoidance scheme. (Not ALL hybrid trusts would have this problem, but many of them would ..)

You could be the next tale of woe in the Financial Review .

If you have a hybrid trust, come and see us, and we will tell you if you have a problem.

I was under the impression that Hybrid Trusts & Family Trusts can't get negative gearing deductions & any losses would accumulate in the trust.

Apparently they have a "unique Tax Intelligence™ trick" so you can get a deduction. Does this sound possible what they are saying?

Isn't a Family Trust the same as a Discretionary Trust, but only has family members in the trust?

 

[alexlee]

I was under the impression that Hybrid Trusts & Family Trusts can't get negative gearing deductions & any losses would accumulate in the trust.

The source of your 'impression being what, exactly?

There have been extensive discussions (largely inconclusive, since the law isn't black and white on this) about hybrid trusts.

Isn't a Family Trust the same as a Discretionary Trust, but only has family members in the trust?

There is no such thing as being 'in the trust'.

With tax, it's all about the technicalities and precise definitions. Get the terms wrong, and you're toast.

 

[Terry_w]

What a load of crap! is what I would say

Trusts can negatively gear like a person or company can. For tax purposes trusts are treated as an entity and like any entity any losses in that entity cannot be used to offset the income of another entity.

eg. you have an income of $50,000 and buy a property with a $20k loss your taxable income becomes $30,000

A trust has an income of $50,000 and buys a property with a $20k, loss the trusts taxable income becomes $30,000.

This is negative gearing.

If you are talking about distributing losses then this is not possible in a trust just as it is not possible for your to give your loss to someone else.

If you want to reduce your personal income with a trust structure what you could do is to borrow to acquire income producing units. You will be able to claim the interest on these borrowings (depending on the trust set up). Often the interest is more than the income and this can help reduce your personal income tax.

 

[Terry_w]

Apparently they have a "unique Tax Intelligence™ trick" so you can get a deduction. Does this sound possible what they are saying?

Isn't a Family Trust the same as a Discretionary Trust, but only has family members in the trust?

I would say it is a unique marking technique.
A family trust is just a discretionary trust. Same thing.