To all the wisemen(and women) out there,
Please help to pick out the holes in this scenario:
Single income family with hubby on highest marginal tax rates.
Set up a trust to buy over PPOR and then rent it back; at market rates of course. Make it negative geared to maximise deductions.
I presume you will lose the CGT advantages if you sell PPOR as it will be classified as an investment to the trust?
But what if we intend to hold it very long term until hubby stops working or drop to low tax rate and then sell it to minimise capital tax?
Thanks in anticipation
lee
Will incur stamp duty on the purchase. Will lose CGT exemptions as well.
Please speak to an accountant before you go into this to make sure it is the right step.
Cheers,
Simon Macks
Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Why sell, why not later keep it as an IP and rent to another tenant?
By the way are you talking about buying a PPOR through a trust or selling your PPOR to the trust?
REDWING
“Money is a currency, like electricity and it requires momentum to make it Effective”
Count The Currency With This Online Positive Cashflow CalculatorI think the second one Redwing.
Simon Macks
Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
I’m sorry, I have obviously missed the underlying idea here. What is the advantage to yourself. Trust is the one negatively gearing & losses cannot be distributed to the beneficiaries assuming it is a family trust of course. What is the point you are trying to make????
Claiming the expenses of the family home as a tax deduction is the aim I believe.
Simon Macks
Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Sure, but this isn’t going to reduce his taxable income. I also don’t see how that will advance him with regards to his property portfolio
Originally posted by JKM:Sure, but this isn’t going to reduce his taxable income. I also don’t see how that will advance him with regards to his property portfolio
It wont? Surely claiming the interest on the home will decrease his tax bill?
I don’t advocate this approach and would suggest anyone considering it to seek professional advice.
Cheers,
Simon Macks
Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Originally posted by Mortgage Hunter:
It wont? Surely claiming the interest on the home will decrease his tax bill?Let’s go back a step. The PPOR is to be purchased by a trust. The trust is negative geared NOT the individual. The individual cannot have losses distributed to them for the benefit of a tax deduction.
Sorry – I get the point. The trust will need to have profits generated to use the losses?
Is that the point?
Thanks
Simon Macks
Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Exactly. Now if more properties were being purchased through the trust maybe I would understand. But given that this is a single income family & Lee has made a point of telling us that he is in the top tax bracket, I don’t see how this transaction will personally benefit him. I only see a CGT & stamp duty issue. Once again, how will this expand his property portfolio. Mind you I am learning alot from the comments you make on this site Simon so I must thank you as well.
Thanks…..I think [biggrin]
Cheers,
Simon Macks
Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Dale GG suggests (after you have consulted your Lawyer and Accountant) that if you were to set up a Hybrid Trust and bought units in that trust (ie: give it the borrowed $$) then it is seen as a separate investment, and if making a loss, can benefit him with his high Tax bracket.
I do however agree with you that the rest doesn’t really help him now, either way. There is also a note in Dale’s book that states that the Tax office is looking at people that transfer their PPOR in this fashion – something about it not being for investment purposes but for for personal gain……. Can’t recall exactly.Cheers
C@34Our greatest weakness lies in giving up. The most certain way to succeed is to always try something one more time.
– Thomas EdisonI think this would be seen as tax avoidence.
This makes the ATO not happy and possible jail time. I would not do this.CATA
Asset Protection Specialist
[email protected]I would agree that his would attract the attention of the tax office because the purpose of the arangement is to avoid tax not really for investment. think very carefully about this seek proffesional advise.Enjoy your home and concentrate your investments on other houses. That is my point view on this mattr any way
Cheers
JohnI have looked at this idea before and it doesn’t really appear to be worth doing, unless the place is your temporary home. The reasons being:
– Trust must have other income to offset (unlikely for most people)
– If Unit/hyrbid is used, the ATO doesn’t like it
– May have to pay land tax, where you otherwise wouldn’t
– Must pay CGT if sold (and possibly that NSW exit tax)
– After several years, your rent paid would exceed expenses, the property would become positvely geared and you would be paying more tax where you wouldn’t otherwise had to.The CG issue is probably the main one. Imagine how much CGT you would have to pay if you purchase for $200K and sold a few years later for $1,000,000.
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
This might also incure fringe benifits tax. I really wouldn’t do this, AT ALL.
CATA
Asset Protection Specialist
[email protected]
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