Getting "equity" into a DT - how to?

Discussion in 'Accounting & Tax' started by Hamish Blair, 21st Apr, 2017.

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  1. Hamish Blair

    Hamish Blair Well-Known Member

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    Dear all

    thanks for the education I receive by reading your questions and responses. @TerryW in particular.

    I have a question regarding discretionary trusts and how they can purchase property.

    Is it possible, and indeed, is it necessary, to somehow "capitalise" the trust beyond the nominal amount (e.g. $20) when initially settled?

    A company can issue shares for $$ thereby creating shareholders' funds that it can invest. Likewise a Unit Trust can issue units for valuable consideration.

    Is there a way funds can be "gifted" into a DT?

    Not sure why I think this is a good idea; perhaps my question is more conceptual.

    If its not possible, then I suspect the main way a DT would generate a positive equity is by acquiring and holding an asset which increases in value.
     
    Hamish Blair, 21st Apr, 2017
    #1
  2. Biz

    Biz Well-Known Member

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    @D.T.

    sorry...
     
    Biz, 21st Apr, 2017
    #2
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  3. D.T.

    D.T. Specialist Property Manager Business Member

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    You can gift us all you like :)
     
    D.T., 21st Apr, 2017
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  4. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    Well besides giving money to @D.T. who will gladly accept, my question is WHY do you want to.

    Is it so that the Trust has enough money for a deposit when it first starts? You can loan to the Trust so that it has enough money for deposit to buy it's first IP.
     
    Westminster, 21st Apr, 2017
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  5. hash_investor

    hash_investor Well-Known Member

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    Is that loan tax deductible if it used in income generation activities?
     
    hash_investor, 21st Apr, 2017
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  6. DaveM

    DaveM Well-Known Member

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    If the loan is at commercial terms and interest charged, then generally yes. However the income from the interest would need to be declared by the lender and tax paid on it.
     
    DaveM, 21st Apr, 2017
    #6
  7. Mike A

    Mike A Well-Known Member

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    yes can gift to a trust. do proper documentation.

    journals easy DR bank. CR increment to corpus (equity section)

    other way is via a loan.

    lawyer can advise the best strategy

    its a good idea if you are in a high risk profession and have some excess cash lying around that you would like to protect. note rules re clawback etc.
     
    Mike A, 21st Apr, 2017
    #7
  8. Paul@PAS

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

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    There may also be benefits of holding the new proceeds on subtrust.
     
    Paul@PAS, 21st Apr, 2017
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  9. Terry_w

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

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    I think I have written a legal tip on this. You can either gift or lend to the trust. Which is better will depend on the circumstances
     
    Terry_w, 21st Apr, 2017
    #9