Updating the HDT - who pays?

[Ralph]

First of all, I'd like to say thanks to Chris for the information and openness in sharing the results of looking into the HDT issue and getting a result that at least secures past usage.

Whilst my thinking is obvious from the post below, please note that I'm not yet advocating a position as I'd like to understand the issue a little better first.

The questions I'm thinking of are whether the outcome of Chris' work with the ATO (1) changes the functionality of the deed compared to when it was provided to me (early 05), and (2) whether it is right that I should pay to have it fixed to the degree it can.

In relation to (1); I recognise that's a question I have to answer for myself.

In relaiton to (2); I have received a letter from my accountant recently who put me onto HDT's. They have asked for a considerable sum to update the deed as has been discussed in this forum. If I don't update then I'm looking at very large denied interest deductions.

The question that occurs to me is whether there was a change in tax law making the deed 'not work' after the establishment of the deed (in my case early 05 and at a cost of over $2k), or whether the deed has now been shown to never have been compliant.

If it was never compliant, I'm interested in views (either way) on the rationale as to whether it is right for the consumer to pay to fix a product that may now be shown to never have worked as advertised?

 

[INXS]

As an accountant I have steered client's away from HDT's and saved them thousands of dollars. The cost/benefit analysis of anyone using a HDT up to this time must be shocking. With the latest developments I will let things settle down a bit before recommending such a structure to clients. Ralph when you were steered towards using an HDT you should have been advised that they were an aggressive form of tax planning and structuring. Therefore they come under ATO scrutiny. Therefore changing trust deeds is part of this process and is a cost you personally need to accept as part of the whole HDT tax planning scenario. Of course if you were not originally advised of the aggressive nature of the HDT structure you may have a case.

 

[JIT]

First of all, I'd like to say thanks to Chris for the information and openness in sharing the results of looking into the HDT issue and getting a result that at least secures past usage.

Whilst my thinking is obvious from the post below, please note that I'm not yet advocating a position as I'd like to understand the issue a little better first.

The questions I'm thinking of are whether the outcome of Chris' work with the ATO (1) changes the functionality of the deed compared to when it was provided to me (early 05), and (2) whether it is right that I should pay to have it fixed to the degree it can.

In relation to (1); I recognise that's a question I have to answer for myself.

In relaiton to (2); I have received a letter from my accountant recently who put me onto HDT's. They have asked for a considerable sum to update the deed as has been discussed in this forum. If I don't update then I'm looking at very large denied interest deductions.

The question that occurs to me is whether there was a change in tax law making the deed 'not work' after the establishment of the deed (in my case early 05 and at a cost of over $2k), or whether the deed has now been shown to never have been compliant.

If it was never compliant, I'm interested in views (either way) on the rationale as to whether it is right for the consumer to pay to fix a product that may now be shown to never have worked as advertised?

Ralph, I'm not sure what your accountant is charging for this, but I think the market rate is less than $800.

I think that's a small price to pay for the amendment (given the time and costs involved in getting it in the first place)... not sure what your negative gearing losses are, but I would guess that it is much more than this...

Yes, the HDT doesn't quite have all the benefits that you may initially have been sold, but that's life.

I would just move on and either use this structure only with specific advice prior, or use alternative structures with less taxation risk.

 

[Mry]

The problem is that we don't know what is in the PBR yet. We don't even know exactly what needs to be updated in the deed.

One of the things I tell me clients when it comes to the grey areas of interest deductions is that your situation and intent make a big difference. Is there something in this PBR that allowed a person with the right situation and intent to get the tax deduction, and this is what got the deduction rather than the legal framework of the deed? Or did it have to be a perfect mix to work?

There's too many questions at the moment. Its worth noting that MGS don't think the deeds need to be amended, its the ATO that wants them amended.

 

[austini]

Going from memory one thing I noticed in the letter about MGS's PBR is that it applies for financial years 2011 - 2015. Or it may have been 5 years from 2011 F/Y (I threw the MSG letter out having gotten rid of our HDT). So what happens with HDTs after this 5 year period? More uncertainty???

 

[coastymike]

Mry

Agreed. It is like every area of tax law. One person is classified as a non resident another with a similar situation but a slight twist of the facts and they are a resident. Another can claim a LAFHA and someone else in a seemingly similar situation with a different set of facts cant get a LAFHA. Same legislation different facts.

Don't see how this is any different to every single other situation that applies to tax law and individual circumstances.

 

[Ralph]

Thanks, guess I'll look to my accountant to ensure they're not jumping the gun on this update............hate to do it twice...