I have searched the forum on Hybrid and Unit Trusts and have picked up some useful information, however I am still unsure as to whether I should set up a Unit or Hybrid trust in relation to an IP I wish to build.
My details are:
I currently own 2 IP’s which are NG value $550t
I have my own super fund and wish to form a JV via a trust. The DIY super fund would say invest $50t, I would contribute $300t mostly NG. After the build the property would be worth $450t going on current prices in our area. My initial thoughts are to rent out the IP for 12 months to reduce the CGT by 50% then sell. I could then move onto a bigger IP development.
The dilema I have is that my children as beneficiaries are both at Uni and will be in the work force, one in 12 months (lives in the UK)and the other in 24 months.
So is a Hybrid trust out as the build would take 6-9 months and I could only take advantage of my children’s current nil/low income for a short period of time?
Something else I’m not sure on is if my DIY super wishes to purchase more units at a later date, do I have to sell some of my units back to the trust for this to happen ?
Look forward to any repliesRobbo26
Robbo26
Hi Robbo
Not sure about the super side of things, but why have a unit trust? With a unit trust, all the income is fixed in accordance to % of unit holdings. Its like holding shares in a company. So at tax time you will have no choice in where the income goes. ie no flexibility at all.
But if you had a discretionary trust or a hybrid trust, (or units of the unit trust owned by one of these), then each year the trustee would have the discretion as to where the income can be distributed. ie it gives you much more flexibility.
Terryw
Discover Home Loans
Parramatta
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Thanks Terryw, thats the way I was inclined to go.
Robbo26
Robbo26
Be careful with this type of partnership with your superfund. Learn the rules and follow them, IMOP don’t even try to bend them (which is what you may be doing)
CATA
Asset Protection Specialist
[email protected]Cata……Damn, I read the DIY super directive on the ATO site and thought as long as investment was at “Arms Length” it was ok. That is the fund and I invest in the “Trust” but we are at arms length through the trust !
I have read of this “structure” on the “net”/forum and also a Financial Advisor friend said it was ok !
Could you please advise how I would bend the rules. I am a trusteee of the DIY fund perhaps thats it !Cheers
Robbo26
It may depend on who the trustees are. I think they cannot be related in anyway.
Have a look at http://www.chrisbatten.com.au
Terryw
Discover Home Loans
Parramatta
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Just send me a blank email, with “subscribe†in subject line.Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
I am not liscenced for superfunds, but some people that I deal with reguarlly are and they have advised me personally not to do this as they feel it is a very grey area.
I would talk to a SMSF specialist and get the facts for yourself.
Sorry I can’t help you further except to do youe due dilligence throughly, remembering that the laws for SMSF have been changing alot lately. So much so that I know of superfund specialists that have stoped setting up funds untill it settles down again.CATA
Asset Protection Specialist
[email protected]Cheers Guys, will check out the site and talk to a professional Only problem there is I live in NNSW and the people I have spoken to previously said the structure was ok.
Robbo26
Cheers Guys, will check out the site and talk to a professional Only problem there is I live in NNSW and the people I have spoken to previously said the structure was ok.
The site I obtained info from was http://www.superoutsource.com.au and the topic was called “How to get more power out of your super fund.cheers
Robbo26
Chris Batten site states “Your superfund can only have units in the unit trust when the unit trust has NO borrowings and the property it owns is not used as security for any borrowings”
I would adhere to this, and if trustee of the Hybrid trust is a company it appears to me I should be ok. Will still seek professional help from DIYS and Trust expert, (are there experts in both ?)
Cheers
Robbo26
I would be more concerned with the Super fund side of things. Yes, they are a version of a trust deed, but you need a seperate lisence for these.
Happy Hunting Robbo26. Let us all know what you find.
CATA
Asset Protection Specialist
[email protected]Thanks Cata, I’m talking to an Accountant this weekend and I will post his answers, (hope he knows a lot about DIYS and trusts).
cheers
Robbo26
Spoke to an Accountant on the weekend and he advises all ok for my SMSF to enter a JV with a Hybrid trust to purchase/build an IP. I asked if a corporate Trustee was needed so the SMSF and the HT did not have the same trustees and he said this was not necessary, as by using a trust we were at arms length form the prsonal loans I would take out.
He did agree that changes have been happenning with SMSF and would need to obtain the latest information re any Budget changes from his accounting body.Cheers
Robbo26
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