HDT Deeds from Maquarie Group Services

Hi i have been reading in the somersoft forums regarding rulings from the ATO about HDT's and interest deductibility. Has anyone heard from Chris Batten or the ATO about these Trust Deeds?

Should i wait until it is been approved by the ATO or just go ahead and get a HDT Trust deed and hope it is okay when claiming interest for negative geared property in the Trust.

Any thoughts or comments please?

 

Do you need a trust immediately?

 

Hi Triu,

I don't have an answer for you but I'm also eager to hear a response from the ATO. With tax time approaching it would be nice to have some direction before then. I could continue claiming interest as I have done for the past 3 years but if they disallow the deductions using Chris Batten's trust deed I will owe the ATO quite a large sum of money, which is a bit of a worry.

 

I am not in a hurry to get a Trust Deed yet. But i am waiting until an exact answer is approved by the ATO regarding Chris Batten's deeds. I want to make sure if i am going ahead and buying property and shares etc i want to make sure that i can get the interest deductibility and asset protection etc.

I hope the ATO does not take years and years to give us an answer.

 

My first HDT

Had my trust deed created more than 6 months ago ....I have been waiting ....and waiting .....but now have just made a purchase and need to "take the risk" , deciding if i should or should not use HDT. Likely the decision is yes. Not as big as some but this is my biggest IP purchase and I am a bit nervous re using HDT.....

Say the IP 's total expense is $3,000 per month and income is $2,000 per month, hence every month I need to borrow $1,000 to fund the short fall. Can I still claim tax deduction on the $1,000 shortfall , or can only claim tax deduction on the interest incurred in borrowing the $1,000 ?
I would appreciate any comments. Thank you.

 

Salsa
depends what the shortfall is made up of. If you borrow $1000 to lend to the trust then the trust willclaim the interest on the $1000.

To date we have had 3-4 ATO enquiries over the past 2 years in relation to claiming interest against a HDT in an individual return. To date all have been resolved with a minimum of fuss and quite easily. I do not envisage the ATO causing anay problems regarding interest deductibility. Their main concern is on the redemption of the units.
NickM

 

Thank you Nick.
My latest addition will be via HDT and will settle end of June. Have some more detailed questions, I guess Nick or anyone who has used HDT could help me please:
Money borrowed from bank by salsa, says interest is 100K per year
Salsa buys s income units from HDT
HDT purchase house : rental income - expense = net income , distrubuted back to salsa, says 70K per year
===>
salsa use LOC to fund this 30k shortfall hence incur interest
at the end of the the year salsa has debt of 33K(30k plus 3K interest)

Q1: can salsa claim making a loss of 33K, or 30K , or 3K ?
Q1: if house needs major expense like bathroom reno or re-roof, should this cost be taken out of trust's rental income , hence reduced the amt trust distributes to salsa for that year ? Or is there another way ? Can salsa buy more income units from trust so that trust has $$ to do the reno ?
Ta.

 

Where can I buy a trust deed by MGS? Best price?

 

Unfortunately MGS do not sell direct to the general public

You have to go through a lawyer or an accountant that subscribes to their services

Nickm

 

Nick might not have seen your question ...

I don't like the sound of renovations on a newly acquired IP - it sounds like an improvement or initial repair (repairs necessary when acquired). If so the it must be capitalised - NO DEDUCTION.

Add to the cost base and use building allowances to write off over 40 years usually.

Subscribing capital via purchasing more units is one option - but you must be careful to issue the units at market price otherwise CGT value shifting *might* be a problem.

If you choose to let the Trust use some of your unpaid income distribution (by way of loan), you will still be taxed on it. If you want to deduct interest on money loaned to the trust, then it should be an arm's length commercial loan and again you will be taxed on this interest income.

You need to seek appropriate advice BEFORE acting, so much depends on your overall objectives, financial situation and of course the fine detail of your trust deed.

Cheers,

Rob