Tax question about unit trust and duplex

[hc_andy]

Hi All,

We have a unit trust which owns a duplex in qld. The duplex is broken into unit 1 and unit 2 and both are rented out. We sought advice from an accountant who said that we might need to lodge a separate tax return for each unit. Is this true? I thought we would need to just lodge a single tax return for the trust???

Thanks.

Andy

 

[DaveM]

The trust prepares the income tax based on overall profit/loss not the asset inside it (though the asset's tax status do affect the former). Its like saying I have 40 investment properties so I need to prepare 40 tax returns a year?

I would suggest seeing another accountant.

 

[RPI]

Ditto on last part

 

[hc_andy]

Thanks all. That has been very helpful.

 

[coastymike]

A set of financials will be prepared which might detail the income and expenses for both properties but agreed there is only one tax return to be done.

 

[hc_andy]

One final question...

I take it that the loss which the IP makes can not be distributed to the beneficiaries of the Unit Trust?

The accountant which we're currently seeing seems to think we can do it this way. He plans to lodge a tax return for the Unit Trust and because the IP is making a loss, he plans to distribute the loss amongst all the beneficiaries - so if my share is 10% and the IP makes a loss of $1000, he seems to think I can claim 10% of that loss on my personal tax return??? Is he off his rocks???

Thanks.

Andy

 

[Terry_w]

One final question...

I take it that the loss which the IP makes can not be distributed to the beneficiaries of the Unit Trust?

The accountant which we're currently seeing seems to think we can do it this way. He plans to lodge a tax return for the Unit Trust and because the IP is making a loss, he plans to distribute the loss amongst all the beneficiaries - so if my share is 10% and the IP makes a loss of $1000, he seems to think I can claim 10% of that loss on my personal tax return??? Is he off his rocks???

Thanks.

Andy

This may be possible depending on the type of unit trust it is and how it is structured

 

[Aaron_C]

he plans to distribute the loss amongst all the beneficiaries - so if my share is 10% and the IP makes a loss of $1000, he seems to think I can claim 10% of that loss on my personal tax return??? Is he off his rocks???

It is possible depending on how it is structured. If the Trustee bought the property and got the loan itself, then you cannot distribute the loss.

However, if you borrowed the money to give the trust to buy the property in exchange for units, then the loan is in your name, not the trust's. The trust doesn't have a loss anymore because it hasn't directly borrowed the money. It then distributes the net rental to you, and you offset that with your interest repayments to be negatively geared.

 

[hc_andy]

Thanks again all for your very insightful advice.

Cheers.

Andy