Trust and neg gearing

[Panda]

Hi all,
If i have property in a hybrid D Trust and I make a loss due to mortgage interest payments being above and beyond rental ncome and the trustee is me as an individual can I claim that interest as a deduction on my personal tax or does it remain within the Trust and hence NOT reduce my taxable income?

Any comments greatly appreciated.


Cheers,
Panda

 

[Panda]

Hi I just did some more research and it seems that I can and therefore should be doing this. but it seems that my accountant has not been doing this . Which I suppose is my responsibility ultimatly.

Cheers,
Panda

 

[GreatPig]

Panda,

Whose name is the loan in?

If it's in your personal name, how was it put into the trust to purchase the property?

Normally for neg gearing, you borrow in your own name then buy income units in the HDT.

GP

 

[Panda]

Hi GreatPig,
The loan is in my personal name and the property is in the trust and there has been special income units issued. I did all this research ages ago before I set up the trust and knew what I was talking about back then. Then I sort of gave it over to a new accountant and forgot about it and just trusted him.

I have been given this lesson twice now. But obviously have yet to learn it properly and that is, as an investor you don’t need to know everything but you need to know enough to be able to actively check over and ensure that everything is functioning properly. Its a bit of work but its important as this keeps you in the drivers seat.

I think a checklist is the go. So every year at tax time I check off my check duties and rules and ensure that im going in the predetermined direction and that everyone is on the same page.

Cheers,
Panda

 

[Ross]

Panda
It sounds like the structuring has been setup correctly and yes, the trust would distribute the income to you personally which you would offset against the interest expense, hence you still receive the negative gearing benefit.
Sounds like you may need to change accountants

Ross

 

[Chilli]

Panda,
I too found out the hard way that not all accountants and fin planners are familiar with HDT.

 

[redwing]

Panda,
I too found out the hard way that not all accountants and fin planners are familiar with HDT.

Me Too..latest comment was "oh, nobody uses them anymore"..then when I explained it a bit more he was interested I put him onto Dales Book...

 

[Panda]

The situation now is that I have just recieved a large tax bill from the ato since property income and expenses have not been accounted for in my personal income tax return. So my plan is to talk to my existing accountant to sort this out and highlight how it works along with the paragraphs in the trust deed that allows it and the special units etc.

Will the accountant be able to ammend my tax return and resubmit it? There is also a case for last years as well which is in the same boat since it was the same accountant.

Cheers,
Panda

 

[Puppeteer]

You should be able to get an ammendment with no problems. I did that for some unclaimed depreciation on 2 properties.

 

[Mry]

Trust amendments are a pain, but the personal return would be easy. Very possible.

You shouldn't have to pay for it either.

You should take a copy of trust magic as well if he doesn't believe you. If you need further help, I can send you a five page summary of how it works from Macquarie.

 

[Panda]

Thanks guys,
I called up the ATO and spoke with someone there and they said that an ammendment for both years would be no problem, just need to submit it.

I may need to take you up on that offer Mry. I'll see how I go first.

Thanks again,
Panda