lifeXMember@lifexJoin Date: 2004Post Count: 651
I have set up a cheapie online family trust with company trustee. Can I put a negatively geared property into it…..do I use income units or something.
Or do I have to get a full hybrid discretionary trust set up by accountant?
Thanks in advance.
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LifexperiencePropertyGuruParticipant@propertyguruJoin Date: 2003Post Count: 1,502
I had family trust before and then with the help of my accountant I changed it to Hybrid trust. I think you can do also.
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NZ loan pre approval from OZ in 48 hoursTerrywParticipant@terrywJoin Date: 2001Post Count: 16,190
You can use a disrectionary trust to hold a -ve geared property, but cannot offset the loss against your own income.
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if I (individual) was to borrow say $30K at 7% from a bank for a deposit and loan that money to your trust to buy a property, i understand that the interest on your loan ($3OK) is not tax deductible. However what if the trust paid you interest on your deposit eg at 1%. As you are now receiving income from your borrowed funds – could you now claim the interest as per neg gearing.
ie borrow 30K at 7% = $2100
Trust pays 1% on 30K pa = 300
Loss = $1800
Dale GG refers to it in his Trust Magic book but uses a higher interest rate being paid from the trust to the individual and states the interest is deductible(ie borrow at 6% and receive 7%). In this instance – would there be a need to set up a hybrid trust just to claim the neg gearing benefits?
O.S.STerrywParticipant@terrywJoin Date: 2001Post Count: 16,190
How would you borrow the deposit? Against existing property you own? Then the trust could get the loan. But usually most people just borrow in their names and then lend to the trust at the same interest rate – so the trust can then claim the interest on this deposit (with a written agreement).
You would still probably need a hybrid to claim most of the benefits of negative gearing.
eg a $100,000 property with a 80% LVR. You borrow $20,000 and pay 6%. If you charged the trust 10% for this money, you would be making an extra 4% of $20,000 = $800 per year (and paying extra tax on this). The trust would then be claiming another $800/year as a cost = a large loss
I just realised I read your post incorrectly!
If you did it the other way as in your example, the ATO may disallow the deduction as you a deliberately making a loss. But even if it was ok, the deposit would have to be much larger for it to have any effect, but it possibly could work.
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