Shares and HDT
- Thread starter Panda
- Start date
I'd be guessing that it depends on how you're using shares.Panda said:
If you're looking at quite long term, buy and hold, growth shares, and you are heavily leveraged, it could be worth while (ie, your holding costs will be exceeding your income for a period of time).
But if you are making more money along the way from shares you are trading or receiving dividends than the interest you are paying, then an HDT will probably not be worth it.
The biggest advantage of an HDT is that the individual can take negative gearing losses from the investment, while having the flexibility to distribute income. If you are positively geared, an ordinary discretionary trust would be sufficient.
Hiya,
Further to Geoff's comments, if you record a loss in your trust then you cannot claim the franking credits in your personal return.
You need to distribute a profit in order to do so.
So, if your shares are geared and your other expenses (travel, gifts, stationery, etc) exceed the net result from your shares, then you would have a loss and thus lose your franking credits.
But, if you had a HDT and geared through your own name, then provided that your income was greater than your expenses, you could still negatively gear the interest in your own return, and claim back the franking credits...
Cheers
James.
Further to Geoff's comments, if you record a loss in your trust then you cannot claim the franking credits in your personal return.
You need to distribute a profit in order to do so.
So, if your shares are geared and your other expenses (travel, gifts, stationery, etc) exceed the net result from your shares, then you would have a loss and thus lose your franking credits.
But, if you had a HDT and geared through your own name, then provided that your income was greater than your expenses, you could still negatively gear the interest in your own return, and claim back the franking credits...
Cheers
James.
Hi Gang,
Quite often the topic of Disc Trust Vs HDT comes up. My view for what it is worth is that one should go for the HDT because you can never be quite sure what you might want to do in the future with your investing. Therefore set yourself up with the most flexible structure. The cost difference is insignificant and the HDT provides every benefit that a standard Disc Trust has to offer but offers so much more.
Quite interestingly in one of Huntley's share publications the benefits of using a HDT for shares was viewed very favourably. I think it is great to be able to borrow for shares at the appropriate time. For example, when the market tumbles it is worthwhile buying into quality stocks. Depending on your circumstances it would be a shame if one was locked into a standard Disc Trust structure when opportunities like these arise.
Just another viewpoint.
Cheers - Gordon
Quite often the topic of Disc Trust Vs HDT comes up. My view for what it is worth is that one should go for the HDT because you can never be quite sure what you might want to do in the future with your investing. Therefore set yourself up with the most flexible structure. The cost difference is insignificant and the HDT provides every benefit that a standard Disc Trust has to offer but offers so much more.
Quite interestingly in one of Huntley's share publications the benefits of using a HDT for shares was viewed very favourably. I think it is great to be able to borrow for shares at the appropriate time. For example, when the market tumbles it is worthwhile buying into quality stocks. Depending on your circumstances it would be a shame if one was locked into a standard Disc Trust structure when opportunities like these arise.
Just another viewpoint.
Cheers - Gordon
Hi Geoff,
Hopefully Dale or one of the other accountants will answer your question.
We setup a DT originally then subsequently setup a HDT through the same accountant. As our circumstances continue to change I can state from experience that having negative cashflow properties locked up in the DT is causing us some headaches. How I wish these were purchased through a HDT like we do nowadays.
Having setup both types of trusts I don't recall the difference in cost between the DT & HDT being that much different. I did compare the difference between the deeds quite sometime ago and it really comes down to the addition of a few extra paragraphs in the HDT deed allowing for the issue and redemption of special income units. Otherwise the deeds were identical.
In terms of cost if you don't use the HDT's Unit Issue options then one should pay the exact same cost as for a DT. And if Units are issued then it only requires a couple of simple extra pieces of paperwork. Then the net rent is distributed from the HDT to the relevant individual to be offset against related interest expense. Again from what I can see there is minimal extra work for the accountant.
Perhaps my view is not totally accurate and if so one of our friendly accountants can correct me.
But in summary, circumstances can change sometimes due to unexpected events so from personal experience I can't stress strongly enough to set yourself up with the most flexible structure.
Cheers - Gordon
Hopefully Dale or one of the other accountants will answer your question.
We setup a DT originally then subsequently setup a HDT through the same accountant. As our circumstances continue to change I can state from experience that having negative cashflow properties locked up in the DT is causing us some headaches. How I wish these were purchased through a HDT like we do nowadays.
Having setup both types of trusts I don't recall the difference in cost between the DT & HDT being that much different. I did compare the difference between the deeds quite sometime ago and it really comes down to the addition of a few extra paragraphs in the HDT deed allowing for the issue and redemption of special income units. Otherwise the deeds were identical.
In terms of cost if you don't use the HDT's Unit Issue options then one should pay the exact same cost as for a DT. And if Units are issued then it only requires a couple of simple extra pieces of paperwork. Then the net rent is distributed from the HDT to the relevant individual to be offset against related interest expense. Again from what I can see there is minimal extra work for the accountant.
Perhaps my view is not totally accurate and if so one of our friendly accountants can correct me.
But in summary, circumstances can change sometimes due to unexpected events so from personal experience I can't stress strongly enough to set yourself up with the most flexible structure.
Cheers - Gordon
Guys,
I won't post NickM's cost structure for establishing these via his company, Strategic Wealth Management, as I consider that his business. But I can say that according to these costings an HDT is about 30% more expensive than a standard DT. And, in my opinion, both options are relatively cheap given the benefits they can deliver.
I plan on engaging NickM to put an HDT in place for me in the near future before I start buying all my negatively geared IPs.
Cheers,
Michael.
I won't post NickM's cost structure for establishing these via his company, Strategic Wealth Management, as I consider that his business. But I can say that according to these costings an HDT is about 30% more expensive than a standard DT. And, in my opinion, both options are relatively cheap given the benefits they can deliver.
I plan on engaging NickM to put an HDT in place for me in the near future before I start buying all my negatively geared IPs.
Cheers,
Michael.
