POPR owned by trust

[DaleGG]

Hiya Jas

I guess you would want to have a commercial reason for doing such things other than for tax purposes . . . and, you would need to have all of your records supporting such a change. That is, your insurance would change etc etc.

I don't see the point at this moment in making such wholesale and radical changes.

But, something to consider for the future perhaps.

Have fun

Dale

 

[Jas]

Originally posted by DaleGG
But, something to consider for the future perhaps.

You're spoiling all my fun today Dale

Jas

 

[beech]

Just thought id bump this thread up from before christmas.

Meeting with Dale next week re trust etc and in gathering some questions for him came across this little beauty again and thought those that had missed this thread might find it interesting.

Can anyone add more to thread?

Darren

 

[djsherly]

I can certainly add another question, in the least!

I almost went through with a decision to have a hybrid trust purchase a new PPOR, eventually this place would have become an IP. In fact, I set up a trust to do just this.

In my hybrid trust situation however, the trust would have issued units to raise the case in order to buy the property. I would have taken a loan from the bank to buy the units. Does this affect the deductibility of the interest?

I would think that the fact the value of units issued matches the value of the property (more or less) would be merely coincidental. The units themselves have no relation to the assets of the trust, other than that the proceeds of the issued units were used to buy a property.

The only difference I see then is that the losses are not trapped inside the trust but incurred by the borrower him/her self.

Chris.

 

[XBenX]

Originally posted by djsherly

The only difference I see then is that the losses are not trapped inside the trust but incurred by the borrower him/her self.

Chris.

Not sure if I understood the rest of your post correctly but....

above is a reason for going to a hybrid or ut over family or dis - due to tax deductions

 

[sunnywan]

Anyone out there actually purchased PPOR using a Hybrid Trust

Originally posted by djsherly
I can certainly add another question, in the least!

I almost went through with a decision to have a hybrid trust purchase a new PPOR, eventually this place would have become an IP. In fact, I set up a trust to do just this.

Following on from the above post, I am interested to know if there is anyone out there who has actually bought a PPOR using a Hybrid and renting it from the trust.

From this post, it seems that if you want to purchase a PPOR using a trust, a discretionary is better suited?

 

[sunnywan]

Anyone out there actually purchased PPOR using a Hybrid Trust

Originally posted by djsherly
I can certainly add another question, in the least!

I almost went through with a decision to have a hybrid trust purchase a new PPOR, eventually this place would have become an IP. In fact, I set up a trust to do just this.

Following on from the above post, I am interested to know if there is anyone out there who has actually bought a PPOR using a Hybrid and renting it from the trust.

From this thread, it appears that if you want to purchase a PPOR using a trust, a Discretionary is better suited than a Hyrbid?

 

[Gozooo]

Originally posted by DaleGG
Yes, I do it myself and have seen it done many times.

One of the advantages is that the trust can provide a fully furnished home for you to rent and in which case the furniture is tax deductible as well. Even if depreciated.

so Dale, if I own and run a small business, with plans to expand, and plans to buy IPs (again), can I/should I purchase my (new) PPOR in a trust, and new furniture in a trust for asset protection from claims from my business - (run currently as a Partnership (with my husband)) and still claim tax deductions?

Thanks
Cathie
Partner
Goz Graphics


PS. Thanks for the Heads up Kevin, will remember next time

 

[Gozooo]

Previous post quote was supposed to be Dale's original one, saying he used a trust to purchase PPOR.

Not sure what happened.

Cathie

 

[Kevmeister]

Gozooo:

You can edit your post after posting using the edit button, if desired.

 

[Owen]

Originally posted by DaleGG
Another excellent advantage is the ability to refinance the property and use the funds for whatever purposes you like and still claim a tax deduction for the interest, which, an individual cannot do.

I'd forgotten about this post too but rereading it I would like to ask Dale about the comment he made quoted above. 'use the funds for whatever you like and still claim' is the bit that interests me.

How can this be so when it is the purpose of the money that determines the deductability of the interest? I can't use the money to buy me an overseas holiday because the money is in the trust. If I can do that then how is it still tax deductable?

The only thing I can think of is the refinaced money is distributed to me as a beneficiary because it is profit from capital gains and because of this it is still claimable as a distribution.

Am I on the right track?

 

[DaleGG]

Originally posted by Owen
I'd forgotten about this post too but rereading it I would like to ask Dale about the comment he made quoted above. 'use the funds for whatever you like and still claim' is the bit that interests me.

How can this be so when it is the purpose of the money that determines the deductability of the interest? I can't use the money to buy me an overseas holiday because the money is in the trust. If I can do that then how is it still tax deductable?

The only thing I can think of is the refinaced money is distributed to me as a beneficiary because it is profit from capital gains and because of this it is still claimable as a distribution.

Am I on the right track?

Hi Owen


Aaaah, that beats a lot of people, too. The trust borrows money to repay a loan that it has with you. In this case, the trust has swapped one (yours) with another loan (the banks) and so the interest is tax deductible - for those interested, see Robers & Smith tax case from about 1992/1993.

Now, the trust repays you and what you do with those funds becomes totally irrelevant!

Does this help?

Dale

 

[NickM]

Land tax is an issue in NSW as disc trusts do not receive the threshold.

I think that Vic does not have the same problem (Dale GG may wish to clarify)

NickM

 

[john doe]

Hello,

I just read in the fin r/v today that there is no land tax threshold for IPs in Vic as there is in NSW. If that's true, then losing the land tax threshold when using a trust wouldn't really be an issue in Vic.

Cheers

John

 

[PIppety]

Folks,

I noticed in an earlier post it says "you are better to have a commercial reason for doing this rather than just doing it to avoid tax" (forgive me if the quote is not exact).

What does this mean for the average Mum and Dad who do not run a business ? Is there some way that a "commercial reason" can be created ?

PIppety

 

[Les]

G'day Pippety,

It sounds quite "business-like" doesn't it??

I noticed in an earlier post it says "you are better to have a commercial reason for doing this rather than just doing it to avoid tax" (forgive me if the quote is not exact).

What does this mean for the average Mum and Dad who do not run a business ? Is there some way that a "commercial reason" can be created ?

This comment is often used when considering ways of "saving money". The meaning of "commercial reason" can be loosely translated to mean "What benefit can I gain here, OTHER THAN saving Tax?"

So, in Mum and Dad's case, it doesn't mean they need to start a business. Mainly, they need to look for "other ways" to gain a benefit in what they're doing - if what they do is ONLY to save Tax, they will probably be Taxed anyway, AND fined for avoidance.

For example - if putting things in Trust, the commercial reason for doing this is Asset Protection. Any Tax savings are incidental - the protection is the important bit.

Hope tht helps,
Regards,

 

[PIppety]

Les,

Thanks for that. It is much clearer now !

Cheers
PIppety

 

[RichardA]

Renting residence from trust

Originally posted by DaleGG
Hi

One of the advantages is that the trust can provide a fully furnished home for you to rent and in which case the furniture is tax deductible as well. Even if depreciated.

Another excellent advantage is the ability to refinance the property and use the funds for whatever purposes you like and still claim a tax deduction for the interest, which, an individual cannot do.

CGT will not apply on the sale of this PPOR if the home is subject to a long term lease.

Dale

Dale

Could I clarify a few points please (excuse me for being a little slow on the take up - some of the lingo is new to me).

1. We are talking about a trust buying an existing principle residence from an individual not buying a new property? Hence no CGT on sale?

2. Why the need for long term leae?

3. Is this opportunity available to Discretionary Trust only (ie not Hybrid) ?

4. Please confirm that once a trust buys the principle residence you lose the CGT relief even if you are renting it back.

5. In this scenario:
- If I have a principle residence owned by wife
- Trust buys another property and we move into the new one renting it from the trust
- We rent out our old principle residence owned by wife
- We live in new house for 3 or so years.
- We then move back into old house.
Does or can old house be maintained as principle residence (and therefore maintain CGT exemption) even though not lived in?

Assuming the answer is that you forgo the exemption - would we be better to buy the new residence in our own name and therefore take advantage of the Pr exemptions.

Have I made any sence?

Thanks in anticipation.

Richard A

 

[DaleGG]

Re: Renting residence from trust

Hi

Obviously, the sale of your PPOR is exempt from CGT. However, if a trust owns a house which is rented to you, under the defiinitions of the law for long term leases, this same house owned by the trust might also be effectively exempt from CGT too.

The long term leases effectively gives the tenant the same rights as the owner.

NO, either trust could do this, but, the tax office is presently unhappy about unit trusts owning a home and renting it to a unitholder. As a hybrid trust is part unit trust and part discretionary trust it is uncertain what views they will take about this structure renting a home to the unitholder. Obviously, seek advice from your own advisors before considering this!

NO, I cannot confirm that a trust owning a house and renting it will be subject to CGT - see above.

In your scenario, you will have to choose which way you wish to go. If you choose to have the old home as your PPOR then it will be still exempt from CGT even though it was a rental property for 3 years.

However, in doing this, the new home owned by the trust will be subject to CGT.

You cannot have both in this sense. Sorry

Dale

Originally posted by RichardA
Dale

Could I clarify a few points please (excuse me for being a little slow on the take up - some of the lingo is new to me).

1. We are talking about a trust buying an existing principle residence from an individual not buying a new property? Hence no CGT on sale?

2. Why the need for long term leae?

3. Is this opportunity available to Discretionary Trust only (ie not Hybrid) ?

4. Please confirm that once a trust buys the principle residence you lose the CGT relief even if you are renting it back.

5. In this scenario:
- If I have a principle residence owned by wife
- Trust buys another property and we move into the new one renting it from the trust
- We rent out our old principle residence owned by wife
- We live in new house for 3 or so years.
- We then move back into old house.
Does or can old house be maintained as principle residence (and therefore maintain CGT exemption) even though not lived in?

Assuming the answer is that you forgo the exemption - would we be better to buy the new residence in our own name and therefore take advantage of the Pr exemptions.

Have I made any sence?

Thanks in anticipation.

Richard A

 

[RichardA]

Re: Re: Renting residence from trust

Originally posted by DaleGG
Hi

However, if a trust owns a house which is rented to you, under the defiinitions of the law for long term leases, this same house owned by the trust might also be effectively exempt from CGT too.

Dale

Thanks Dale

You say "might" be exempt. What is the defining factor that determines if it is exempt or not?

Richard