Bucket company Hdt with shares trader/investor structure

Hi,

I am currently a sole trader investigating what might be a good structure for the future. I should say this is my only source of income. I have been doing it full time for 6 months and did not setup a structure because I needed to test the waters to see if I could do it. I am slowly getting more confident so am starting to plan.

I am classified as a trader and what you can claim for tax is different then an investor.

1st question if I trade under a HDT if any shares are held for more then 12 months will I get the CGT discount. Ie Can a HDT be treated as both a trader and investor for tax with regards to shares.

I could trade through a company with the shares held by the HDT but then I lose CGT benefits....

Most likely option I think so far is company trustee,HDT trading the shares with a bucket company for the excess but the bucket company would need to lend back the money after paying tax to replenish the trading capital in the HDT. Hence the HDT now has a debt to the bucket company so I don't see how I could increase my gearing on this excess money by borrowing more from a bank in the HDT because what I would be borrowing against is owed to the bucket company. I do not want to margin lend because I want to be able to buy any share I like and I don't have to worry about margin calls etc.

So I thought the bucket company might be able to borrow money add it to the excess then lend the whole lot back to the HDT for trading capital but then is just a company being a beneficially good enough for it to borrow. There might be an argument that being a beneficially does not guarantee regular income to service the loan by the bank.


I and wondering if there can be a simpler option. Is it possible to issue units under/worded in a trust deed to receive income but with an exclusion clause of money distributed from the bucket company back to the HDT.

The bucket company could just buy units and would be entitled to receive income(not capital just income) from any other source except the money it distributes back to the HDT. It could service a positive geared loan and the limited liability I believe means the HDT is not exposed to everything but only the units held by the bucket company in regards to the loan. Other money in the HDT should be safe?

2nd question is it possible to issue income units with an exclusion clause for income from a bucket company.

3rd Is there any type of argument for being an employee of a HDT or bucket company and which one would you choose and why.

The main reason is to have access to salary sacrifice, Fringe benefits and have a personal income if you want to borrow for something(a car) or gear in your own name into something else.

Thanks

 

You should get some professional advice for your structure. Some key points I will ask about the arrangement is DIV 7A, when you lend funds from the bucket company.

You should also consider the anti-avoidance of Part IVA.

If in doubt you could apply for a private ruling from the ATO.

 

There is no general answer, it depends on your situation and priorities.

You really need to consult someone with all your facts/scenarios on the table.

Cheers,

Rob

 

Thanks for the replies