I noticed in this years tax return there is a section IT5 - Net Financial Investment Loss.
http://www.ato.gov.au/individuals/content.asp?doc=/content/00223018.htm&page=2
Complete this item if you received income from or claimed deductions in relation to any of the following types of investments:
- shares
- an interest in a managed investment scheme
- rights or options in respect of any of your shares or interests in a managed investment scheme
- distributions from a partnership that included income or losses from an investment listed above
- interests in trusts that you provided consideration to acquire
- any investment that is of a similar nature to those listed above.
If you are not sure whether an investment you hold is a financial investment, go to www.ato.gov.au/incometests. If you are still not sure, phone the Individual infoline on 13 28 61.
I assume the purchase of Income Units in a Hybrid Trust would be classed as a 'financial investment', and there would be a reportable Net Financial Investment Loss if the interest on the loan was higher than the income distribution received.
However, in the case where a Discretionary Trust is used instead and the individual borrows x dollars at y% interest and on-loans the funds to the trust at the same commercial interest rates, there would be no Net Financial Investment Loss. Even if the ATO classed the transaction as a 'financial investment' the individuals interest deduction would always be equal to the amount of interest received from the trust.
Does this sound right?
http://www.ato.gov.au/individuals/content.asp?doc=/content/00223018.htm&page=2
Complete this item if you received income from or claimed deductions in relation to any of the following types of investments:
- shares
- an interest in a managed investment scheme
- rights or options in respect of any of your shares or interests in a managed investment scheme
- distributions from a partnership that included income or losses from an investment listed above
- interests in trusts that you provided consideration to acquire
- any investment that is of a similar nature to those listed above.
If you are not sure whether an investment you hold is a financial investment, go to www.ato.gov.au/incometests. If you are still not sure, phone the Individual infoline on 13 28 61.
I assume the purchase of Income Units in a Hybrid Trust would be classed as a 'financial investment', and there would be a reportable Net Financial Investment Loss if the interest on the loan was higher than the income distribution received.
However, in the case where a Discretionary Trust is used instead and the individual borrows x dollars at y% interest and on-loans the funds to the trust at the same commercial interest rates, there would be no Net Financial Investment Loss. Even if the ATO classed the transaction as a 'financial investment' the individuals interest deduction would always be equal to the amount of interest received from the trust.
Does this sound right?