I am looking at creating a company as trustee for our new family trust in the family trust there will be our new comercial property, can I still negative gear the property through the family trust.
No. Not against personal income, just against other income the trust makes. Losses cannot be distributed.
If you had a hybrid discretionary trust, the unit holder could borrow the money and claim the interest against their personal income. In effect this allows negative gearing with a trust.
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
you can’t negative gear directly if you personally loan funds (ie if you borrow from a bank) to the trust to purchase in income producing property as the property is held for the benefit of the beneficiaries (even tho this may be you as well). However, i believe if the Trustee decides to pay you interest for the use of these borrowed funds, then you may be able to claim your personal interest costs.
eg. John Smith Borrows $200,000 from the Chargelikeawoundedbull Bank, Interest costs are 7%. John Smith loans these funds to Smithy’s Trust, which the Trustee agrees to pay you 5% interest. Costs to John Smith $14K pa, Income to John Smith $10K pa.
BUT LIKE I SAID I AM NOT SURE ON THIS – BUT I WOULD PUT THIS SCENARIO TO MY ACCOUNTANT/SOLICITOR AND SEE WHAT THEY SAY.
OSS
Grillo,
I reckon Terryw is on the money re the way to negative gear through a trust. (Have a look at chrisbatten.com.au)
I like OSS’s thinking, but I think when you see a lawyer or accountant about it they might point you to something called Ure’s case and say that the ATO won’t let you claim the deduction.
Hope that helps.
SKM
Not the only way to do things but I have one question “Why was the trustee company not set up at the same time as the trust?”
This is the long way arround things.
The hybrid trust can be a handful and if not done right can have many holes for potential lawsuits.
You can not negative gear through a family trust though.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
