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Trusts and negative gearing

Discussion in 'Accounting, Tax & Legal' started by builder2818, 4th Aug, 2009.

  1. builder2818

    builder2818 Well-Known Member

    Joined:
    31st Dec, 2008
    Posts:
    89
    Location:
    Sydney
    What is the law when it comes to this? Can someone give a definitive answer because some say you can and others say you can't. Does that mean accountants like chan and naylor with their property investors trust are technically not right or is it the accountants who tell you it's not allowed just not creative enough?
     
  2. Rob G.

    Rob G. Well-Known Member

    Joined:
    6th Jun, 2007
    Posts:
    717
    Location:
    Melbourne, VIC
    You could always negative gear units in a trust where *ALL* benefits of the underlying investment go to the Unit Holders in their proportion.

    This means ALL income distributed to unit holders and units must be redeemed for market value.

    Some earlier HDT deeds seemed to be non-compliant in this respect.

    Whether getting clobbered twice for CGT is worth the stamp duty savings and negative gearing deductions is for you to work out.

    Cheers,

    Rob
     
  3. GregR

    GregR Reid Consultants

    Joined:
    13th Jul, 2009
    Posts:
    273
    Location:
    Berwick Vic
    Builder2818,
    I am not sure we have a 'law' that has been through the court system. The ATO has made noises that they are looking at the use of the hybrid trust such as the Chan and Naylor property trust. I would be cautious. The other main reason that I would not advocate their use is that the lender choice is restricted as many lenders will not accept a HT or will only do so at commercial rates rather than residential.