Dale, thanks. You're a scholar and a gentleman!
Your comments about managed funds are not quite correct. With a managed fund not only does the investor receive income but also constantly benefits from a revaluation of the units, reflecting the increase in capital value (shown daily). I'm not aware that there are any hybrid trusts which having issued 500 units for 500k goes back to the investor and tells him a year later that his units are now worth 600k... However, that is exactky what a trustee in bankruptcy is going to argue! (see below)
As for people who hold forever...well good luck to them because they may have found the only loophole I can see I have no intention of holding forever, believing in opportune moments to extract maximum profit. I must clarify that I have NEVER said that the interest is not tax deductible - it is IF the person claiming the tax relief also realises the capital gain. Therein lies the dilemma facing the ATO - this is a 2 stage process where the 2nd stage MAY negate the first. I believe they would only act at Stage 2.
With regards to asset protection, the creditor can take the income units entitling him to the income. He can also argue that those units have a capital value, based on the method of and value at acquisition...
I must also add that if HDTs were indeed such unique instruments then the principle would apply just as well for shares. To my knowledge, based on knowing the broad investment strategies of some extremely wealthy people this is not a strategy that is popularly employed. I mean why not buy $1 million worth of income units in a HDT, have the trust by $1m worth of shares and then pass all the CGT to the wife and kids??
Finally, I haven't dismissed the PBR. Will look at it during the week and drop you a line then.
Cheers
Your comments about managed funds are not quite correct. With a managed fund not only does the investor receive income but also constantly benefits from a revaluation of the units, reflecting the increase in capital value (shown daily). I'm not aware that there are any hybrid trusts which having issued 500 units for 500k goes back to the investor and tells him a year later that his units are now worth 600k... However, that is exactky what a trustee in bankruptcy is going to argue! (see below)
As for people who hold forever...well good luck to them because they may have found the only loophole I can see I have no intention of holding forever, believing in opportune moments to extract maximum profit. I must clarify that I have NEVER said that the interest is not tax deductible - it is IF the person claiming the tax relief also realises the capital gain. Therein lies the dilemma facing the ATO - this is a 2 stage process where the 2nd stage MAY negate the first. I believe they would only act at Stage 2.
With regards to asset protection, the creditor can take the income units entitling him to the income. He can also argue that those units have a capital value, based on the method of and value at acquisition...
I must also add that if HDTs were indeed such unique instruments then the principle would apply just as well for shares. To my knowledge, based on knowing the broad investment strategies of some extremely wealthy people this is not a strategy that is popularly employed. I mean why not buy $1 million worth of income units in a HDT, have the trust by $1m worth of shares and then pass all the CGT to the wife and kids??
Finally, I haven't dismissed the PBR. Will look at it during the week and drop you a line then.
Cheers