Family Trust Losses & PSI

Discussion in 'Legal Issues' started by JJ1081, 4th Jul, 2017.

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  1. JJ1081

    JJ1081 Active Member

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    Hello Everyone,
    I have family trust where me and my wife both are directors. Trust main business activity is sports and physical recreation instruction. Trust incurred losses for last five years but it is still active. Now I have got contract with mining company as an engineering consultant through my family trust ABN. I understand that it is subject to PSI rules as trust main income is through consulting service. My question is, Can I still offset PSI income with trust losses which accrued for last few years or not at all?
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    You can't be a director of a trust. perhaps you mean the trustee company?

    You have a contract of the trustee has a contract?

    If the PSI rules apply you will be taxed on the income not the trust.
     
  3. JJ1081

    JJ1081 Active Member

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    You got it right director of trust company. Family trust owns the company and I got the contract as an independent contractor.
    Can I offset those losses with PSI ?
    Thanks Terry
     
  4. Ross Forrester

    Ross Forrester Well-Known Member

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    No

    To recoupe the losses you will have to change the nature of your work provided so that you are running a business.

    Either that or put income producing investments in the trust.

    And you will want to look at the laws associated with trust tax losses. You should be ok but you still need to mechanically go through the law and tick off each section as it applies to you.
     
  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    If the family trust owned the company it would be the shareholder. Other way would be it is acting as trustee.

    Trust would be treated as a separate tax payer so its losses wouldn't be effected by your income.
     
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  6. JJ1081

    JJ1081 Active Member

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    Thanks Ross,

    That means I have to have other income producing investments greater or equal to my consulting work income to recoup the previous losses.
     
  7. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    No. The trust would need to have income to recoup the losses. This income could be any amount as slowly over time it would eat up the losses.
     
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  8. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Trust loss rules are complex and contained in ITAA36 Schedule 2F. PSI isnt eligible trust income in any event. The net PSI after eligible expenses is deemed to be earned by the individual not the trust. An income injection scheme would fail the trust loss rules.
     
  9. JJ1081

    JJ1081 Active Member

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    But can I claim the car expenses and entity maintenance expenses (such as accounting, ASIC fees and other PSI related expenses?
     
  10. JJ1081

    JJ1081 Active Member

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    So if Family Trust has share trading account , that should recoup the losses, from trading income right? Because it is again different business activity.
     
  11. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Work related expenses might be able to be claimed.
     
  12. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    If the trust makes income it might be able to have this offset by carried forward losses.
     

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