I would like to know if anybody knows an accountant in Perth that is familiar with (hybrid) discretionary trust. From what I read here it’s a specialised area that not many accountant know well.
While I am here, can anyone explain if hybrid discretionary trust can decide on who will receive the income that can be vary from year to year (like discretionary trust but unlike unit trust)?
Also can a trust start with certain amount of money (assets) and additional asset added to it at anytime?Yes to all you questions. Try Brett Davies at http://www.taxlawyer.com.au I think he is based in Perth.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
Click below to email meTerryw | 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
Thanks Terry.
Have anyone in Perth used this Tax Lawyer?I’ve used them to set up two trusts myself.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
Click below to email meTerryw | 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
Thanks Terry.
One last question, is there any circumstances where it will not be benefitial not to have discretionary (hybrid) trust for investor? Except for the obvious ie setting up and ongoing cost.One thing I can think of is Land Tax. Trusts usually don’t get any tax free thresholds.
Terryw
Discover Home Loans
Mortgage Broker
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, I don’t understand when you say Trust usually don’t get tax free thresholds. My understanding is that trust must distribute income every year and the tax is paid by beneficiaries. So if a beneficieries is a person with no income than the tax free threshold will apply?
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I have made an appointment to see a charterred accountant on Monday. His company has helped my friend to setup family trust and company.Sorry, Zen I was referring to Land Tax. ie trusts usually have to pay land tax even if the land is valued at $1, whereas individuals may not have to pay land tax unless their property is worth $160,000 (or whatever it is now) or more.
Terryw
Discover Home Loans
Mortgage Broker
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
Thanks for the info Terry, I didn’t know that.
I went to see a CPA that works for an (expensive) accounting firm on Monday. He explained alot of things and seemed to be very good with his job. Anyway, before I went to see him the impression that I got from this forum is that you need a hybrid discretionarty trust to enable to borrow money against a trust and have the borrowing cost tax deductable against your personal income. But I was explained that (non hybrid) discretionary trust can do that too.
He also told me that there is no need for us to have a trust for our purpose since we both work and on top tax bracket. Comment please.
By the way he charges over $250 an hour and if we have a trust will likely to cost $1500 + a year to run it.Hi Zen
I’m not sure I understand what you are saying.
With a hybrid trust, you borrow money to buy units in the trust. Since you are borrowing the interest will be able to be offset against your own income.
With a discretionary trust, the interest will be claimable by the trust only. The trust, or trustee, is borrowing to buy the property. If after expenses are deducted from the rental income, there is a loss. This loss must stay in the trust, and cannot be offset against personal income.
you said “borrow against a trust”. If the trust has an unencumbered asset, then it may be possible for you, the trustee, to borrow against this (if the trust lets you) and the interest for this loan could be offset against other personal income if the loan was used to buy an investment property.
If you are in the top tax bracket, then a trust may still be a good idea, for asset protection reasons, succession reasons and tax reasons.
eg. You could use a hybrid trust, offset the interest from your personal income and have the profits distributed to a company which you own and would only pay 30% tax – assuming you had no other beneficiaries.Maybe you should check with another accountant just in case.
Terryw
Discover Home Loans
Mortgage Broker
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, sorry that I confused you. But you have explained it to me. I really meant to say “to buy an IP in a trust and have the loan deductable against personal income”.
What you said about having a company as a beneficiary so income distribution is only tax at 30% is a very good and clever way of reducing tax.
Thanks for the tip and yes I will talk to another accountant.
Do you know what is considerate as a resonable cost to run a simple discretionary trust?$200 per year should do it, plus maybe extra per property, CGT etc. If you have a company, then annual ASIC fees etc about $350 extra. A Hybrid may be a bit more complicated, and hence cost more.
Good luck with it.
Terryw
Discover Home Loans
Mortgage Broker
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
Thanks Terry.
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