Hi, if you are trustee of a discretionary trust, is it legal to rent a house from the same trust? I have heard this has been before parliament for several years to make illegal but at a seminar recently I was told it was not legal. Regardless of whether legal or not, can someone also provide me with a reference e.g. Tax Act clause etc.
Thanks in advance.
If you bought your PPOR and placed in a trust, you can simply rent it from your trust. This though must be fair market rent.
Rgds.
Lucifer_auYes it is legal. I don’t know of any references to discretionary trusts, but there is a tax ruling on renting from unit trusts. TR 2002-18.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terry,
Does this mean you would be able to claim tax deductions through your trust on interest, as the property is income producing?
Michael Maddy
[email protected]
Canberra, AusMichael
Yes, that is my understanding – but I am not an accountant.
But you will be required to pay market rates, and as rents rise, you may end up paying tax on your own rent!
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
The big thing is that you cannot claim ‘losses’ for your own personal income – as you could with a unit trust.
Basically you would treat it as a IP for the trust, and you as the standard tenant. So I don’t think your landlord can do you too many ‘favours’…
Cheers
Mel
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