All Topics / Legal & Accounting / Property Trusts No good for Bottom Line

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  • Profile photo of TheShoulderGuyTheShoulderGuy
    Participant
    @theshoulderguy
    Join Date: 2007
    Post Count: 44

    Hi all I went to my accountant yesterday and discussed the use of a trust but I came out a little confused because if at the end of the day you enter into a deal to make a cash gain by reno/subdivision and rent/sell strategy over an 18mth – 2 year time frame then any gains made are offset by the losses sustained in holding the property. How is this then beneficial to ones bottom line? It seems that buying in my wifes name may afford some protection in the short term and benefit our bottom line when it comes time to sell with 50% CGT discount and at a low marginal rate. 

    Does anyone have anything to add either way with buying via a individual vs trust structure?

    I am still a bit confused here.

    Thanks

    Profile photo of tammytammy
    Member
    @tammy
    Join Date: 2005
    Post Count: 155

    Fisrtly, I am not an accountant……

    Now my understanding of trusts (yes I have one) is that yes, the losses are offset against the priofit. Just like if in your personal name. The key difference is that only a profit can be distributed, not a loss. What that means in the real world is that on an ongoing basis if a property held in your wifes name is running at a loss, those losses can be offset against other income (ie tax deduction against a salary), however if those losses occur within a trust (discretionary reference here) then those losses stay within the trust until the property returns a profit and then offset. Is this making sense? At the end of the day, the outcome will be similar if your wife is the trusts benificiary, however you will need to fund those losses in the interim as they cant be claimed until the completion of the deal. The 50 % CGT reduction still applies if owned by the trust, and held for greater than 1 year.

    Trusts offer other benifits such as asset protection and the ability to top up your income when distributing a profit to the best tax outcome as required.

    Hope this helps.
    Cheers
    Tammy

    Profile photo of EtceteraEtcetera
    Member
    @etcetera
    Join Date: 2004
    Post Count: 24

    Hi everyone,

    We have a trust, too.

    Just to clarify, the eligibility to the 50% CGT discount is dependant on who receives the trust distribution. eg a person would receive the 50% discount if the trust held a property for more than a year, but if the funds were distributed to a company, the company would not be eligible.

    Does that help a bit, or have I muddied the waters?

    Cheers,

    Kerryn.

    Profile photo of tammytammy
    Member
    @tammy
    Join Date: 2005
    Post Count: 155

    Quite true Kerryn

Viewing 4 posts - 1 through 4 (of 4 total)

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