All Topics / Legal & Accounting / Lending to a Trust

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  • Profile photo of CiaCia
    Participant
    @cia
    Join Date: 2004
    Post Count: 11
    March 30, 2004 - 7:56 am

    I plan to buy an IP and plan to put it in a bybrid or discretionary Trust. I can borrow money at 3.5%.

    1> Can I lend money to the trust at 7% to buy the IP

    Cheers
    Cia

    Profile photo of woodsmanwoodsman
    Member
    @woodsman
    Join Date: 2004
    Post Count: 714
    March 30, 2004 - 1:24 pm

    Cia,

    My understanding of a hybrid discretionary trust is that you purchase units in the trust. The consideration for this is money that you have or borrowed funds. Not sure for a standard discretionary trust.

    James

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    April 1, 2004 - 6:01 am

    Yes I think James is correct. With a hybrid, you borrow to buy the units in the trust, so you are not really lending to the trust.

    If it was a standard discretionary trust, you may be able to do it, but it would in effect be diverting income from the trust to yourself. So you may end up paying more tax that you would otherwise. ie You would be making a profit on the interest rate margin.

    Terryw
    Discover Home Loans
    North Sydney
    [email protected]

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

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