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Lending Money to a Trust or Company Trustee

Discussion in 'Finance & Banking' started by WealthCreator, 12th Jan, 2008.

  1. WealthCreator

    WealthCreator New Member

    11th Mar, 2007
    Sydney, NSW

    We have recently set-up a Discretionary Trust fund with a Corporate Trustee to invest in managed funds & shares etc.

    We recently got a personal loan to bump up our savings.

    Which brings us to our question, do we:

    A - Lend the money via a drawn up contract to the Company (shareholder to company loan) so that the company has a loan which it can claim a tax deduction for the whole amount plus interest and then some how invest in the name of the trust. or,

    B - Same as above, but to the Trust fund where only the interest can be claimed as a tax deduction.

    Any help with helping us construct the best strategy would be greatly appreciated for I'm sure than i am missing something as always :confused: .

    Thank you

    Kt & Tim :)
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

    9th Jun, 2005
    Sydney, Australia
    I would think that you don't want your corporate trustee to have any assets - it should generally exist solely to operate the trust ?

    ... in which case B. is the correct option ... noting that the interest is only a deduction to the trust - it can reimburse you for the costs you incur (no personal tax dodge here).

    Of course, you should check this course of action with your accountant first to make sure you've done it right.

    The only other thing I'll suggest is that why on earth are you using a personal loan ? What interest rate are you paying ? If it is more than about 9% then I think you are throwing money away - simply too expensive unless you have a "sure thing" to invest in which will return much more than the interest costs.