All Topics / Legal & Accounting / Moving into an IP under trusts

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  • Profile photo of ptnptn
    Participant
    @ptn
    Join Date: 2006
    Post Count: 74

    Hi all,

    We've recently purchased an investment property under our family trusts.  We intend to rent it out but unfortunately we couldn't rent it out so our family is looking at fixing it up and moving in to it.

    1. Since it has never been rented, can I claim this as my PPoR?
    2. What will happen if I sell it one day, will the capital gain be taxed?
    3. Any thing else that I should be aware of?

    Thanks

    ptn.

    Profile photo of Scott No MatesScott No Mates
    Participant
    @scott-no-mates
    Join Date: 2005
    Post Count: 3,856

    Firstly, you are a separate entity from your FT, so you cannot claim it as you ppor.
    Secondly, the trust will be taxed on the CGT at its marginal rate.

    Profile photo of Dan42Dan42
    Member
    @dan42
    Join Date: 2008
    Post Count: 619

    No, you can't claim the property as your PPOR, and, once sold, the CGT will be calculated at the marginal rates of the beneficiaries of the trust.

    The trust will be able to claim interest, council rates etc, provided the tenants (you) pay a market rent.

    Profile photo of ptnptn
    Participant
    @ptn
    Join Date: 2006
    Post Count: 74

    ouch … kicking my self now…

    For CGT, what happen if I live in there and not pay any rent?

    CGT will be calculated on cost plus interest so it would be minimal wouldn't it?

    Curious
    ptn

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    If you don't pay rent you probably cannot claim any costs such as interest. It is not a commercial arrangement.

    Furthermore, one of the beneficiaries of the trust could probably sue the trustee  too for breaching its fiduciary duty to invest in the best interest of the trust.

    CGT will be calculated on the gain less some costs – The size will depend on how long you keep it for and how big the gain is. The upside is you will be able to distribute the gain to low income earners to minimise tax.

    Don't worry too much, just charge yourself lowish rent. Get the trust to furnish for you and depreciate everything. It might be good to be able to claim spoons as a deduction!

    You can move out down the track. (maybe after depreciation is eaten up).

    You will also have a problem if your trust doesn't have any other income if there is a loss. No tax savings.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of ptnptn
    Participant
    @ptn
    Join Date: 2006
    Post Count: 74

    Thanks Terry,

    So if I buy furniture; Plasma TV, HiFi System, Laptop, …etc.  It can be a write off in CGT?

    Regards
    PTN

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    I don't think so.

    Furniture items would usually be depreciated and claimed against income. But i am not an accountant, so please check

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

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