Trusts

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From: Ctrader .


Chris Batten in "5 reasons not to buy rental properties in your own name" makes the following cases for using trusts:

1.
Problem: After paying off the loan used to acquire my rental property if I re-borrow to acquire a non income producing asset the interest on that loan will NOT be deductible.

Solution: If the property was acquired in a hybrid trust with rights to income contracted to a particular benificiary then interest on a borrowing by the trustee to extinguish an obligation to pay a portion of the net income to that benificiary would be deductible to the trust regardless of what the beneficiary did with the money.

2.
Problem: if you own a rental property and later wish to transfer it to your family trust or superfund you will incur full ad valerum duty (eg $900,000 property would attract $35,990, a $500,000 property would attract $17,990).

Solution: If the property was acquired in a unit trust and had a value less than $1 million then the trustee of the unit trust could redeem the units you hold and issue new units to your superfund or family trust. There is NO stamp duty on the issue and redemption of units in a unit trust in NSW where the unencumbered value of the real estate is less than $1 million.

Is this correct and does the the above stamp duty situation have application in any other states?

Ctrader
 
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Reply: 1
From: Gordon Austin


Also got my free booklet from Chris Batten's crew today. Very interesting stuff. A bit on the agressive side I'm led to believe.

He's really keen on the Hybrid Trusts.

Gordon
 
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Reply: 1.1
From: Mark Laszczuk


I'm keenly waiting for mine to come in. Dale, we'll be talking real soon, I think... For those that have read the booklet, do you think it would be worth purchasing the report for $159?

Mark
'no hat, some cattle'
 
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Reply: 1.1.1
From: Fiona H


Hows this going? Anyone learnt anything new? Pro's? Con's?

What about the tax side. I understood trusts could not distribute "losses" so it could be a while till the property earns enough to absorb the carried forward losses it seems to me.

Cheers
Fiona
 
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Reply: 1.1.1.1
From: Mark Laszczuk


Fiona,
This is true, but looking at trusts that way could be construed as not being able to see the forest for the trees. In other words, don't be discouraged just because you can't claim your losses straight away. Trusts have many advantages that individuals do not. You can claim them (losses) against future earnings, so it does balance out in the end. Check out past posts regarding trusts for some very good background info. A lot of people also seem to think that Dale's Tax Battles manual is pretty good, you might want to think about having a squizz.

Mark
'no hat, some cattle'
 
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Reply: 1.1.1.1.1
From: Robert Forward


Hi Fiona

FYI: Dales Tax Battles Seminar in Sydney last Thursday night was very indepth in explaining structures, especially a trust.

I'd suggest trying to get along to one of his next seminars that are running around the country at the moment. I think his next one is either in Adelaide or Melbourne.

Cheers,
Robert

Property Inspection Reports @
http://www.creativefinance.com.au

The Sydney "Freestylers" Group Leader.
 
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