Warning - Trust question

[PEI]

Is it possible to buy a property under say a hybrid trust, rent the property from the trust and claim the interest expenses of the loan?

 

[Aceyducey]

Sometimes - depends on exactly how you structure it.

Cheers,

Aceyducey

 

[PEI]

Thanks Aceyducey but I'm a bit confused by the sometimes responce. Does this mean "yes" I can but it depends how the trust is structured.

There are so many benifits of doing this but at the end of the day I do not want to be doing anything ilegal.

 

[Aceyducey]

PEI,

It depends on how it's all structure. It works better if you use a corporate Trustee & I'm not certain of the framework around a hybrid trust for this purpose.

You'd have to consult an expert for the details

Cheers,

Aceyducey

 

[austini]

Hi,

This question has been raised before and from memory I think that the main criterea is that the rent must at market rates. Hence it would be wise to have a few property managers provide this information in writing. And perhaps have in the lease that the rent will be increased in line with CPI every 12 months.

And yes as Acey has pointed out having a Coy as trustee would probably be helpfull in this situtation.

If we are lucky one of the local trust experts may pop in and provide some info.

Cheers - Gordon

 

[DaleGG]

HI

Yes, it is possible but you should be aware that the tax office do not like this arrangement and issued an alert about a year ago now.

However, this alert really deals with units trusts and assumes that the intention of the exercise is merely to claim the interest on your PPOR as a tax deduction.

So, if you have more than one property inside the trust, there principal arguement should fail. Furthermore, if you have a clear intention to ceate a portfolio of properties inside the trust and this one will become a legitimate IP in time, then, you would strengthen your arguement.

As you can see, the answer is yes, but, be careful and seek good advice about what you could do to help yourself.

Cheers

Dale

 

[Owen]

How does the ATO treat the same scenario if it is done through a discretionary trust? Does the ‘multiple properties in the trust’ idea help? Obviously I wouldn't be claiming the interest against personal income but would the costs and interest be claimable for the trust?

 

[DaleGG]

Hi Owen

At this stage, the tax office have expressed no concerns about family trusts at all. Yes, the trust can claim the interest and borrowing costs as a tax deduction along with the ongoing maintenance.

I do this myself as part of my asset protection strategies.

Dale

 

[PEI]

Thanks for the replies guys.