All Topics / Legal & Accounting / Discretionary Trust – losses

Viewing 3 posts - 1 through 3 (of 3 total)
  • Profile photo of CiaCia
    Participant
    @cia
    Join Date: 2004
    Post Count: 11
    March 26, 2004 - 2:03 am

    I am setting up a Trust to purchase an Investment Property. In the first 2 years, this property will make a loss.

    I expect that negative income cannot be distributed to beneficiaries to write off against their marginal rate of tax.

    So…. can the losses be carried forward to years that the Trust makes a profit ? If not, how do trusts deal with losses ?

    Cheers
    Cia

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    March 26, 2004 - 2:24 am

    Cia

    Trusts cannot distribute losses, but they can be retained and offset against future profits.

    Have a look at Hybrid Trusts. You may be able to get around this buy using a hybrid trust and borrowing the money in your own name (not the trust) so you can claim the interest on your personal income.

    Terryw
    Discover Home Loans
    North Sydney
    [email protected]

    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

    Profile photo of austiniaustini
    Participant
    @austini
    Join Date: 2004
    Post Count: 15
    March 26, 2004 - 8:42 am

    Hi,

    If you haven’t already setup the trust please consider opting for a Hybrid Discretionary trust. You still have all the benefits of a standard discretionary trust but also huge extra benefits of being able to claim any losses against your personal income and other nice benefits. And if things are done correctly the asset protection is not adversely impacted.

    If you already have a standard discretionary trust unfortunately the best you can do is carry the losses forward in the majority of cases.

    Be very careful also when electing to carry losses forward. Seek advise on this as the choice of test individual can have rather nasty unintended consequences should there be a marriage breakdown etc in the future. These laws are quite draconian.

    So this is another reason for setting up a hybrid disc trust as there is no need in most cases for the losses to be locked up in the trust and hence no requirement to make an family trust “Election”.

    The best resource on trusts is “Trust Magic” by Dale Gatherum-Goss.

    Cheers – Gordon

Viewing 3 posts - 1 through 3 (of 3 total)

You must be logged in to reply to this topic. If you don't have an account, you can register here.