All Topics / Legal & Accounting / Can I invoice my Trust for doing work to its properties?

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  • Profile photo of bespokebespoke
    Participant
    @bespoke
    Join Date: 2008
    Post Count: 30

    Can anyone tell me if the following scenario is possible? 

    If I have a trust which owns properties (and I am a trustee) can I do work on those properties like maintenance, cleaning, garden maintenance, painting etc, and perform these myself within a business name owned by myself and then charge the trust for those services?

    That sounds a bit confusing so I’ll give an example. 
    For example:  I do regular garden maintenance on a property owned by “ABC Trust” as the owner/operator of “XYZ maintenance services” at $20 per week and invoice “ABC Trust” for the service. “ABC Trust” then pays “XYZ Maintenance Services” out of its funds

    Ie: The same as if you paid a plumber or cleaner to perform their services on your properties owned within a trust situation.

    Is this legal as far as the tax office is concerned, and yes I know tax would be payable on the invoiced amount.

    Profile photo of tonyy21692tonyy21692
    Member
    @tonyy21692
    Join Date: 2003
    Post Count: 128

    bespoke

    the ATo do have a ruling on acceptable markups on billing trusts and service entities.  as long as it isn't inflated or artifical (ie a scheme) then ought to be OK (if you are looking for concrete answers get a privae binding ruling).  yes it is a mirror image, a deduction for one means income for the other and has to be in the same financial year when related parties – don't forget you will need an ABN otherwise trust will have to withhold 48.5% tax 

    hope this helps
    tony

    Profile photo of bespokebespoke
    Participant
    @bespoke
    Join Date: 2008
    Post Count: 30

    Thanks for that.

    I will be checking the ATO website and speaking to my accountant too I suppose.

    Now I just have to work out if it is worth doing this, financially speaking as ulimatly I’m just shuffling paperwork and moving money around.

    Just off the top of my head if the properties are positively geared it reduces the amount of positive income and tax payable, but then your still paying tax on the other side anyway (on income form performing the services). Not sure if its worth it in a negatively geared situation as your really only reducing the income of the property(s) and thus increasing the out of pocket expenses.

    Hmmm ……..now I’ve confused myself.

    Does any one do this and if so (if not) why?

    Thanks in advance

    Profile photo of eddieceddiec
    Member
    @eddiec
    Join Date: 2004
    Post Count: 113

    Probably not worth the paperwork shuffle. However, as an idea, if you have kids, get them to mow the lawn, clean the properties, etc, so you could soak up their low tax brackets.  Not a lot of dollars here but may still be worthwhile.

    Eddie
    [email protected]

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Wouldn't it be more beneficial to get as much income into the trust as possible – then you can distribute this to the lowest tax payer beneficiaries. You could just distribute to yourself anyway.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

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