- Important – Read the attached History of Hybrid Discretionary Trusts.
After many years of uncertainty regarding the ATO has finally released a Private Binding Ruling that provides for a full deduction for the interest expense incurred by unitholders.
Some preliminary Q & A's:
Q. Are there any Hybrid Discretionary Trusts OK as far as the ATO is concerned?
A. No. The ATO believes all HDTs established before July 2010 to have problems.
Q. What if I don't update my HDT?
A. Assistant Commissioner informed me on 11 May 2011 those people that didn't amend would have their interest denied as per TD 2009/17.
Q. If I acquired an MGS HDT why should I pay to have it upgraded?
A. I don't believe it needs upgrading (see attached History of Hybrid Discretionary Trusts). I believe MGS HDT users are in a better position than Andrew Forrest was. Pay to have the MGS HDT upgraded if you wish to maintain the deduction and avoid taking the ATO to court.
Q. What if I have a Property Investor Trust?
A. Read attached "History of Hybrid Discretionary Trusts". I am updating Property Investor Trusts to make them compliant. I have discussed this with Assistant Commissioner.
Q. What if I have another type of HDT?
A. Send it to me and I will do a review. It will most likely need updating and I can do that for you.
Q. What is the future of Hybrid Discretionary Trusts?
A. At least now we have a position where we can be certain of the tax consequences. The only question is whether it applies to your circumstances.
Q. Should I apply for a Private Binding Ruling for a HDT I set up 5 years ago?
A. No. PBRs like all ATO advice is only prospective.
I will answer questions in relation to all aspects of Hybrid Discretionary Trusts. I have been dealing with the ATO for nearly 5 years on HDTs. The last 10 months were spent getting the attached ruling.
If enough of you ask the same question and I am unable to answer it or it is specific to the ATO I will put it to the Assistant Commissioner. Even though I feel the ATO is being too tough with everybody with a HDT I do feel they are being fair by allowing people to amend their deed and maintain their interest deduction. This avoids you having your interest denied and waiting while someone fights them to the Full Federal Court. They normally get people to settle and therefore they can't rely if the person wins. Please remember the ATO was wrong with Forrest.
hi I couldn't find the attachment for the history of hybrid discretionary trusts to read through…not sure if I was looking in the right spot.
I am trying to assess if we are best using this type of structure to purchase an IP and rent to ourselves at market rent. We run a small business and are about to pay our PPR off. I have been told this is a bad strategy for asset protection by my lawyer as we are in both directors on this company etc. We currently own two other IP's in a family trust, buy my accoutant suggested that I look into and talk to a lawyer again about the pros and cons of selling our PPR, releasing the much needed and comprised equity and purchasing a house in a trust structure and renting it out oursevles and utilising the negative gearing benefits (we are grouped for taxing purposes – trusts and company and could do the same with the new structure) or just renting a house from a third party (no keen on) and buying other a couple of other IP's and renting them out to third parties. Can anyone please help with advise on these options.
JO_Qld wrote:hi I couldn't find the attachment for the history of hybrid discretionary trusts to read through…not sure if I was looking in the right spot.I am trying to assess if we are best using this type of structure to purchase an IP and rent to ourselves at market rent. We run a small business and are about to pay our PPR off. I have been told this is a bad strategy for asset protection by my lawyer as we are in both directors on this company etc. We currently own two other IP's in a family trust, buy my accoutant suggested that I look into and talk to a lawyer again about the pros and cons of selling our PPR, releasing the much needed and comprised equity and purchasing a house in a trust structure and renting it out oursevles and utilising the negative gearing benefits (we are grouped for taxing purposes – trusts and company and could do the same with the new structure) or just renting a house from a third party (no keen on) and buying other a couple of other IP's and renting them out to third parties. Can anyone please help with advise on these options.
Jo look at the discussion and attachments at somersoft
http://www.somersoft.com/forums/showthread.php?t=71494Terryw | 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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