Unit Trust deductability on borrowings

Hi

I'm aware that if you borrow money to buy units in a hybrid trust, you can claim the interest as a personal tax deduction. I'm assuming that this is the same as a Unit Trust, in that the Hybrid Trust is operating as a Unit Trust if there are units outstanding.

My question is this:

The trust bought a property, and borrowed the money itself. The loss is therefore within the trust.

Is there any way that I can borrow the money myself to pay out the loan the trust has and turn the loss into one I can claim on my tax return? It's a loss of nearly $50K per year, and I thought that it would be better in my tax return now rather than waiting for the trust to ever make that kind of money.

I can't think of how to do it, but was wondering if anybody else knew a completely legal, cost effective way to do so.

Thanks in advance.
 
I don't know about Hybrid trusts, however, .......

Subject to the deed, the Unit Trust should be able to issue units (eg 1 unit =$1). The individual then purchases units in the Unit Trust as an investment. The individual gets the tax deductibility on the loan interest used to purchase the units in the Trust. The Unit Trust accepts the money for the units and pays out the loan on the property within the trust.

Sounds pretty simple and something that your accountant should be able to sort out.
 
Thanks for that.

There are already 400 units that have been issued. How will this affect the transaction?

I assume your concern is that the 400 units are not valued at strictly $1 anymore due to the increase in the value of the property and the change in the amount of the loan?
 
I assume your concern is that the 400 units are not valued at strictly $1 anymore due to the increase in the value of the property and the change in the amount of the loan?

Hi Mry

Thanks for the response. I think my issue is that I don't know enough to be concerned..

I don't believe the property has actually increased much in value. Basically, it was bought for $800K in Jul 04 in Sydney. I have personally had to tip in around $50K per year to fund the shortfall in interest costs. The loan with the bank is currently at $660K, and I owe my parents $240K which they lent to fund the rest of the purchase and the stamp duty.

The way it is structured now is that the trust has the loan, and so the $50K that I am tipping in is owed me by the trust, and the losses are quarantined until future income offsets it.

I'm hoping that there is some way to restructure the borrowings so that I can at least get a tax deduction for that $50K now as that would help offset the cost at least a little. I'm actually resigned to the fact that there probably isn't, but am hoping that due to my lack of knowledge in most things accounting that perhaps there is.
 
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