Loan agreement between trust & individual

[devank]

What is stopping anyone from doing this?
1. Set up a SMSF and buy an IP under it.
2. Get the lowest income earner to obtain bank loan at say 5%.
3. Get them to loan that to the SMSF at a higher rate say 8%

Now, the higher income earner is largely contributing to the SMSF but that contribution ends up with the lowest income earner NOW.

 

[Terry_w]

Thanks Terry, so what is the difference between a capital payment to a trust and a gift to a trust... ?

A payment is usually for something. I think there are only 2 ways to get money into a discretionary trust:
1. Gift it (settle it), or
2. Lend it.

Big differences between the two and which way you will go will depend on your circumstances - tax and other.

 

[JIT]

A payment is usually for something. I think there are only 2 ways to get money into a discretionary trust:
1. Gift it (settle it), or
2. Lend it.

Big differences between the two and which way you will go will depend on your circumstances - tax and other.

My accountant said a capital payment to a trust and gift to a trust are the same thing.
Which are both different to a loan to a trust.