hybrids
- Thread starter julia
- Start date
Lizzie,
Maybe you had better read the draft ruling too. It is not just the intention to make a profit it is whether anyone else would make a profit as well without investing on the same terms as the unit holder. To quote the first post
"Many of the trust arrangements we have examined involve cases where:
the taxpayer's entitlement to trust income is determined by the exercise of the trustee's discretion, rather than by the rights attaching to the units - meaning that the interest is not deductible, or
the taxpayer's entitlement to trust income and/or capital is disproportionately small compared to their contribution to the trust - meaning that the interest is not deductible in full and some apportionment of the interest deduction would be required. "
My interpretation of the draft is if there is a chance someone other than the unit holder will benefit in an uncommercial fashion then the interest deduction has to be reduced at best and in some cases no interest deduction at all.
The draft doesn't bother with whether there will one day be a profit to the unit holder it looks at who else is likely to benefit from the borrowed money as well and then requires apportionment of the interest. In otherwords if it is a hybrid ie more than just fixed rights to the unit holders then interest needs to be apportioned. If it is not a hybrid you have to ask yourself why did you enter into the arrangement anyway?
It is only a draft and they intend to give us more information in the new year.
Maybe you had better read the draft ruling too. It is not just the intention to make a profit it is whether anyone else would make a profit as well without investing on the same terms as the unit holder. To quote the first post
"Many of the trust arrangements we have examined involve cases where:
the taxpayer's entitlement to trust income is determined by the exercise of the trustee's discretion, rather than by the rights attaching to the units - meaning that the interest is not deductible, or
the taxpayer's entitlement to trust income and/or capital is disproportionately small compared to their contribution to the trust - meaning that the interest is not deductible in full and some apportionment of the interest deduction would be required. "
My interpretation of the draft is if there is a chance someone other than the unit holder will benefit in an uncommercial fashion then the interest deduction has to be reduced at best and in some cases no interest deduction at all.
The draft doesn't bother with whether there will one day be a profit to the unit holder it looks at who else is likely to benefit from the borrowed money as well and then requires apportionment of the interest. In otherwords if it is a hybrid ie more than just fixed rights to the unit holders then interest needs to be apportioned. If it is not a hybrid you have to ask yourself why did you enter into the arrangement anyway?
It is only a draft and they intend to give us more information in the new year.
ah - making more sense. sounds like you're talking about one of those horrid little hybrids the tax office is detesting - where not all the income goes to the unit holder but instead is diverted to other beneficaries, whereas the unit holder is still claiming all the interest payments.
fortunately our hybrid is not one of those. all net positive income after costs (discounting interest repayments) go to the unit holder - and then he claims the net loss (atm) against his paye income.
no wonder the banks currently hate hybrids and the ato is looking closely at them ... there seems to be a segment of the population that is trying to circumvent the purpose from which they were introduced and rip off the ato.
unfortunately it gives all us hybrid owners a bad name.
i was just wanting to clarify that depreciation can still be claimed if the hdt is used in the manner they were orginally designed to be used (all net profits to unit holder).
fortunately our hybrid is not one of those. all net positive income after costs (discounting interest repayments) go to the unit holder - and then he claims the net loss (atm) against his paye income.
no wonder the banks currently hate hybrids and the ato is looking closely at them ... there seems to be a segment of the population that is trying to circumvent the purpose from which they were introduced and rip off the ato.
unfortunately it gives all us hybrid owners a bad name.
i was just wanting to clarify that depreciation can still be claimed if the hdt is used in the manner they were orginally designed to be used (all net profits to unit holder).
Hi Lizzie,
Here's what coastymike said about the HDT 12 months ago (see post #29):
http://www.somersoft.com/forums/showthread.php?p=352047#post352047
Since then, my understanding is that ''cost + CPI'' redemption price is no longer possible.
And also, here's what Pat said about the HDT more recently (see post #7):
http://www.somersoft.com/forums/showthread.php?t=46564
Hope this helps,
JIT
Here's what coastymike said about the HDT 12 months ago (see post #29):
http://www.somersoft.com/forums/showthread.php?p=352047#post352047
Since then, my understanding is that ''cost + CPI'' redemption price is no longer possible.
And also, here's what Pat said about the HDT more recently (see post #7):
http://www.somersoft.com/forums/showthread.php?t=46564
Hope this helps,
JIT
