I think the definition of a boarder, from a tax perspective, is one that you charge only for the amount of money they use such as meals, electricity etc. If you charge over and above this then you would be making an income and would need to declare it.

Withdraw the offer and resubmit with changes.

I have heard one bank will pay the loan exit fees on loans with CBA if you bring the loan over to them – possibly NAB.

In asnwer to your Q about unit trusts and distribution of income, the trustee will have to distribute in accordance with the trust deed. There are many different types of unit trusts out there so things will vary, but generally unit holders will have fixed percentage ownership and any income from the trust will have to go to the unit holders in these percentages. So there is no flexibility. But you could have your units owned by a DT and then get the flexibility too.

Also the units are property so if the unit holder where to go bankrupt then the units would be available to creditors. This isn't the case with a DT, usually, as no one person has any right to any income of the trust – just a right to be considered by the trustee when they are making a distribution.

Whether a DT is good for you will depend on your situation. there are land tax and tax loss considerations too. eg Any loss in the trust cannot be used to offset your personal income.

Finance for a DT with company should not be hard. only slightly more difficult than loan in personal name.

A partnership is very dangerous. You should seek advice about running the business thru a company and then having hte shares owned by a DT so any profit flows in to the trust and this can help offset any loss from property investing.

Partnership income needs to be split in accordance with the partnership agreement  – I would think.

You will have to read the tax rulings and IDs and Private binding rulings issued on hybrids.

In the old days various accountants were marketing hybrid trusts and saying you could get the units in the name of the highest income earner to claim a higher deduction and then when you sell the trustee can distibute the CG to the beneficiary with the lowest income.

The ATO said, why the heck would anyone borrow to buy units in a trust if they did not have the certainty of getting the benefit from any gain. It doesn't make commercial sense. So the be able to claim the interest on money used to buy the units the unit hold must be entitled to a fixed part of the gain.

You will find that there are probably many different versions of the PIT trust deed as it has evolved over the years. Having a ruling which says it is ok would only apply to that exact deed.

Anyway, here are some resources on hybrid trusts:
National Tax & Accountants’ Association Ltd    2007    Using hybrid trusts – advanced tax planning or tax nightmare?    Practice Hot Spots Seminar 2007    http://www.ntaa.com.au/media/associationatwork/Usinghybridtrusts.html

TD 2009/17    http://law.ato.gov.au/atolaw/view.htm?docid=%22TXD%2FTD200917%2FNAT%2FATO%2F00001%22

Forrest v Commissioner of Taxation [2010] FCAFC 6

http://prc.macquariegs.com.au/documents/precedents/mgs/free/THDTEMA00501.pdf

http://prc.macquariegs.com.au/documents/precedents/mgs/free/THDTEMA00401.pdf
 

You can avoid the cross coll by borrowing 80% on this property and then some more money from a LOC on another property.  Cross coll benefits only the lender.

Hi S

Thanks for the feedback.

There is nothing wrong with hybrid trusts (part discretionary, part fixed) as long as they are used commercially then you won't have any problems wit the ATO. But the problem with this is your trust will be acting like a unit trust initially. this will mean lack of tax flexibility, lack of asset protection etc. It may also mean you will need to pay CGT on the units being bought back by the trust when it converts into a discretionary trust. This could possibly result in double CGT. You should ask about this.

$3500 is very expensive.

True, the cloning rules have been tightened – but not sure how this applies as it wouldn't have been possible for one trust to clone and avoid the vesting rule in 80 years – to clone both trusts had to be identical, which included the vesting date.

It is not just the PIT that has no vesting date, that can continue indefinitely, it is any trust domiciled in SA (assuming the common law rules against perpetuities don't apply).

I would get a second opinion.

Jeff

You need some prof advice. Firstly you need to protect the assets now.

There is not much you can do without incurring stamp duty at CGT now. You should make sure you have a good will drawn up, and make sure you ask about and include a testamentary trust within the will. There are huge tax advantages and asset protection advantages by doing this.

But make sure you get good advice.

My mate just died and his will which was prepared by an experienced lawyer is very badly drafted.

You need advice because it could be safer to transfer them now to a trust rather than through a will – eg Your situation may be that a family member could potentially challenge the will under family provision legislation. Or it may be more effective to transfer one or more into a SMSF now.

It should be covered in the contract. Read the contract and look for a clause relating to this.

What state is the property in?

ok BB

But, it may be good to have the option of the trust being able to gift as well.. I was thinking this may be classed as a distribution though and taxable.