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Coverting to a Fixted trust

Discussion in 'Accounting & Tax' started by wayne, 5th Jun, 2016.

  1. wayne

    wayne Active Member

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    Hi all,

    I currently have an IP in my own name. we also have a property trust that holds two properties, that for land tax purposes are not entitled to the land tax threshold.

    We are considering amending our trust to a fixed trust, allowing a land tax threshold.

    By doing this is it correct to assume the land tax portion from the trust properties will be added to the land tax assessed on the IP.

    Additionally, would anyone see the restructuring of the trust to a fixed trust as being detrimental with regard depreciation abilities and personal tax.

    Thanks

    Wayne
     
  2. Greyghost

    Greyghost Well-Known Member

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    You will be liable for stamp duty again on the properties in the trust as it may be seen as disposal by the old trust and acquisition by the new unit trust.
    Need to speak to a specialist like Terry or RPI, but you may be stuck with the land tax..
     
  3. MikeLivingTheDream

    MikeLivingTheDream BCOM MCOM MTAX CPA CTA Registered Tax Agent

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    chris batten at macquarie group services is the expert on converting a hybrid or discretionary trust (in NSW at least) without stamp duty and cgt. he is extremely busy so expect a few weeks before he gets back to you. im not aware of many others in the same space.
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    The depreciation is claimed by the owner of the land so this wouldn't change. Personal tax situation would change dramatically as there would be no flexibility in distribution of income.

    You will need permission of the lender to change the terms of the trust.

    You will also have issues with deductibility of interest.

    Seek legal advice.
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    No that is not correct.

    With a fixed trust in NSW the unit holders are assessed as if they are owners of the land. The unit holders may or may not be the same people that own the other existing properties.
     
  6. wayne

    wayne Active Member

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    Thanks for the above,

    If we are able to amend the trust and being being cost effective. By doing this is it correct to assume the land tax portion from the trust properties will be added to the land tax assessed on the IP.

    Being IP land tax + Trust assessed Land tax = land tax payable over threshold

    Or, Will I retain a land tax threshold on the IP and the new trust (fixed structure) have its own threshold.

    Sorry for not understanding.
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    If A owns land and A owns units in a fixed unit trust that owns land then for land tax purposes will be be considered to own 2 lots of land:
    1 for the land in his name
    1 for the land in the trustee's name in proportion to his ownership.
     
  8. wayne

    wayne Active Member

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    Thanks once more Terry.

    Got it.

    Looks like land tax for NSW properties is a considerable expense and will need to be evaluated.
     
    Terry_w likes this.
  9. wayne

    wayne Active Member

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    Hi thanks for your input. with regard chris, are you able to provide his contact details.
    Cheers Wayne
     
  10. sanj

    sanj Well-Known Member

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