Paying Down 1 Loan with a Capital Gain

[Longrass]

Morning my Learned Friends,

Quick Scenario of 2 Properties in my Family Trust:

Single Dwelling Development (Dev1)
July 2014 - Purchased Land
December 2014 - Completed Dwelling
January 2015 - Sold
Capital Gain of $100K

Multiple Dwelling (Duplex) Development (Dev2)

July 2014 - Purchased Land
Not yet commenced contruction
Loan amount $200k
Land purchase price $360k

There are also another 3 blocks under finance, with 2 under construction...

My question is, can I use the CG from Dev1 to pay down the loan on Dev2?

What other options do I have?

 

[Terry_w]

The trustee will have to read the terms of the trust deed. The trust could use capital to pay down other loans probably. But the income will still need to be distributed or taxed in the trustee's hands.

 

[westminster]

I'd be very careful.

I put my sales proceeds into offset so they are available for paying ATO and then for distribution when required

 

[Paul@PFI]

U2 A strange question. A loan is a liability... A debt. Usually a fixed sum. The cgt is is profit.. Income that is taxed. The two don't offset. Other issues may. Tax advice to determine the tax liability a good first step. Then plan a tax strategy to minimise tax. Tax strategies for trusts need advice

 

[Terry_w]

Many people seem to think that tax can be avoided if the 'profit' is reinvested into another project. It doesn't work like this out of trusts, or in.

 

[skater]

What if......the Trust had a CG, but the Trust was running at a loss. Could the funds be used to offset that loss?

 

[Scott No Mates]

Only if the loss by the trust was of a capital nature not a trading loss (interest, rates, management, maintenance, depreciation etc). ie capital gains can be offset against capital losses (which are corralled and can be carried forward indefinitely).