Can anyone tell me if the following scenario is possible?
If I have a trust which owns properties (and I am a trustee) can I do work on those properties like maintenance, cleaning, garden maintenance, painting etc, and perform these myself within a business name owned by myself and then charge the trust for those services?That sounds a bit confusing so I’ll give an example.
For example: I do regular garden maintenance on a property owned by “ABC Trust” as the owner/operator of “XYZ maintenance services” at $20 per week and invoice “ABC Trust” for the service. “ABC Trust” then pays “XYZ Maintenance Services” out of its fundsIe: The same as if you paid a plumber or cleaner to perform their services on your properties owned within a trust situation.
Is this legal as far as the tax office is concerned, and yes I know tax would be payable on the invoiced amount.bespoke
the ATo do have a ruling on acceptable markups on billing trusts and service entities. as long as it isn't inflated or artifical (ie a scheme) then ought to be OK (if you are looking for concrete answers get a privae binding ruling). yes it is a mirror image, a deduction for one means income for the other and has to be in the same financial year when related parties – don't forget you will need an ABN otherwise trust will have to withhold 48.5% tax
hope this helps
tonyThanks for that.
I will be checking the ATO website and speaking to my accountant too I suppose.
Now I just have to work out if it is worth doing this, financially speaking as ulimatly I’m just shuffling paperwork and moving money around.
Just off the top of my head if the properties are positively geared it reduces the amount of positive income and tax payable, but then your still paying tax on the other side anyway (on income form performing the services). Not sure if its worth it in a negatively geared situation as your really only reducing the income of the property(s) and thus increasing the out of pocket expenses.
Hmmm ……..now I’ve confused myself.
Does any one do this and if so (if not) why?
Thanks in advance
Probably not worth the paperwork shuffle. However, as an idea, if you have kids, get them to mow the lawn, clean the properties, etc, so you could soak up their low tax brackets. Not a lot of dollars here but may still be worthwhile.
Eddie
[email protected]Wouldn't it be more beneficial to get as much income into the trust as possible – then you can distribute this to the lowest tax payer beneficiaries. You could just distribute to yourself anyway.
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
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