Hi Nicko

Did you realise if you transfer property to a trust that it is similar to selling it. ie stamp duty will apply and maybe CGT (unless it is your main residence).

From my notes, here are some details on owning your own home in a trust:

Legal Cases:
Tabone and Commissioner of Taxation [2006] AATA 466 (29 May 2006)
http://www.austlii.edu.au/au/cases/cth/aat/2006/466.html

Taxpayer Alert
TA 2001/1
Home Loan Unit Trust Arrangement
http://law.ato.gov.au/atolaw/view.htm?rank=find&criteria=AND~unit~basic~exact:::AND~trust~basic~exact:::AND~home~basic~exact&target=ZG&style=html&sdocid=TPA/TA20011/NAT/ATO/00001&recStart=1&PiT=99991231235958&recnum=1&tot=1&pn=ALL:::ZG

Taxation Ruling
TR 2002/18
Income tax: home loan unit trust arrangement
http://law.ato.gov.au/atolaw/view.htm?rank=find&criteria=AND~unit~basic~exact:::AND~trust~basic~exact:::AND~home~basic~exact&target=EA&style=html&sdocid=TXR/TR200218/NAT/ATO/00001&recStart=1&PiT=99991231235958&recnum=16&tot=58&pn=ALL:::E

Terryw
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I disagree with this.

Maybe you are confusing adding back depreciation claimed over the years when calculating CGT?

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There is actually a tax ruling on this in relation to a unit trust. The ATO didn’t like it as they deemed it a scheme to be able to claim the expenses on what would otherwise have been a person’s main residence.

But it could possibly still be done with a bit of careful planning.

But remember, trusts cannot negative gear. So your trust would need other income or you would need a hybrid trust to get around this.

Terryw
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I don’t think there are any stamp duty issues when transfering income units with a hybrid trust.

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Very good Spock. You should be able to pay off the next one faster than the first as you have less interest accruing.

AS an aside, I have come across a client who is currently pay 31% on his home loan as a second mortgage and 12% on the first. An evil broker exploited him by charging him $20,000 for the priviliage. I am refinancing him to 12.25%.

Terryw
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Hi Joel

Have a look at the ATO site, http://www.ato.gov.au and download the CGT booklet. It has a heap of examples in there relevant to this.

Find what the rules are and then work around them.

If you move in and move out, you can still treat the place as your main residence for up to 6 years with a few conditions. After you move back in and out again, the 6 years starts again. There is no time limit listed in the legislation (look at s118-145 of the ITAA and surrounding sections). But there is a Tax Ruling on what constitutes a main residence, they look at time spent there, mail going there, address on electoral roll, drivers licence etc. This TR can be found under the legal search on the ATO site, or send me an email and I can send a copy (it is on my other computer).

If you were to rent out one room and live in the other, then you cannot claim this exemption. The CGT will apply on the part of the place rented. probably 50% of CGT if it is a 2 bedder.

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Hi

I am not sure, I think there is provision for purchasing a house that is already tenanted, where you can still claim it as your main residence as long as you move in as soon as practical.

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Are you asking what the implications are for a beneficiary of the trust to transfer a house they own to a trust?

I think this would be a straight sale with no unusual implications. It would be just like selling to a third party.

Terryw
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Hi Marc

Even when personal debt is fully paid out, I would still suggest looking at putting spare cash into a offset account rather than paying down the loan.

THis is because you never know when you may need that cash for personal reasons. eg. upgrading to a new home, takign an expensive holiday, expensive medical emergency, gifting family etc.

Terryw
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Move in move out again and establish it as your main residence. Then you should be able to get CGT exemption on it while renting it for up to 6 years.

Terryw
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