Private Ruling on Hybrid Trust Situation

Private Ruling Number 66298

As mentioned here:

Another Blow to Hybrids - Somersoft Property Investment Forums

 

As was mentioned in that thread, private binding rulings are just that...private so they only apply to the taxpayer in question and binding only on that taxpayer.

Whilst they MAY be indicative of the ATO's general view on an issue they don't have any wider force than that. It would be alarmist and misleading to extrapolate from a PBR a general principle on deductibility. The terms of the trust and terms of issue of the units will always be critical.

 

Soooo, what they are saying is because there is no right to capital (only income) then there is no commercial value to the investment and so interest is only deducible up the amount of income received.

Is this correct or have I failed ATO-speak 101 ?

If so, I wonder if having exclusive rights to income AND capital would allow full deductions.

 

Pretty sure you have the idea.
If you had exclusive rights to income & capital, there is no need for a HDT though. The ATOs logic is sound, and what the logical people have been arguing for ages.
People dont tend to like the conservative view though, usually a case of "whichever accountant tells me i can pay the least tax is the best accountant, and everyone that argues with them dont know what they are talking about"

 

Then you have people that go to a reputable accountant who says to them 'We're waiting on discussions with the ATO to see what can be done and we'll work from there.'

Mark

 

TR 95/33 and Fletchers case are a public ruling and case law so well beyond doubt and they both say no negatively gearing advantage if it is probable that you will not see the arrangement through to the stage of making a return on the losses. They have also been around for over a decade.

Julia
Ban Tacs Accountants - Rental Properties, Tax, Capital Gains, Fringe Benefit

 

And that's the heart of the issue really isn't it. If it can be demonstrated that you do in fact receive a real and not merely nominal return, I think that goes a long way.

Cheers
N.