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Trust set up and investment property

Discussion in 'Accounting, Tax & Legal' started by lanky_17, 5th Jun, 2012.

  1. lanky_17

    lanky_17 New Member

    7th Dec, 2009
    Gold Coast, QLD

    I was hoping to pick someones accounting brain.

    I want to buy an investment property so I can get some tax deductions. Now I also want this property in a trust structure for the asset protection side of things. So apparently if I was to purchase the house and a discretionary trust was the owner the loan would have to be in my personal name but the income earning asset is owned by the trust, not me personally so the interest on the loan would not be tax deductable to me. Is that true?

    What trust set up can I have? I have been told a unit trust as I can have the loan in the unit trust name. But even then the tax deductions wont go to me personally will they?

    Is it even possible to own the property in a trust and have all the deductions in my personal name?

    I know I should go and see someone but there are way too many cowboys here on the Gold Coast.

    Thanks heaps
  2. Terryw

    Terryw Well-Known Member

    9th Jun, 2006
    You can't have your cake and eat it too!

    You can set up a unit trust and have the trustee of the unit trust as legal owner of the property. Then you as the individual can borrow to buy the units. Subject to the terms of the trust the interest on the borrowings to buy the income producing units can be 100% deductible.

    There is limited asset protection available but some, again depending on the deed.

    There would be limited tax flexibility in the early stages as the unit holder must be entitled to the income to get the deductions. But there is more tax benefits down the track as the units could be redeemed by the trustee and the trustee could borrow to do so with the interest possibly deductible. The units could also be transferred down the track to a discretionary trust for greater asset protection and tax minimisation. But, depending on the state there may be stamp duty (abolished in NSW from july 1 this year).

    If your trust will be owning real property then you need to carefully consider land tax issues.