Pay rent to your own home

I'm just wondering whether we could transfer our own home to a Trust and become the tenant of your own home making it an investment.

Landlord - Trust
Tenant - Yourself

I'm just wondering whether this is something we could do?

 

What would be the point of doing that? You still have to declare any rental income and pay tax on it.

 

Potentially.

But what's the benefit?

 

Stamp duty.
Lose ppor exemption.
Rent you pay will be after tax but will be taxed again in the trust as income.

whats the point?

 

Weirdest thing I heard to date? Like others are asking what's the point?
Set up the trust is that's what you wish, then distribute the income to beneficiaries, but why against PPOR?

 

What a great idea - become liable for land tax, pay stamp duty, reset capital gains base & trap any negative gearing losses in the trust.

 

and pay tax on your main resident rent - these days most positively geared very soon.
Loss of the main residence CGT exemption.
In ability to leave the property via your will.

 

I have heard of people doing this, but it's not a good idea, as per the above posts.

 

You start with the goal in mind and then decide the best tool for it.

you dont go through every utensil in your kitchen and ask can i cut a pineapple with a can opener?

 

I have some clients that do it, its not necessarily a bad idea, but it would be too costly to do it for a property already owned.

 

It works perfectly in some limited circumstances eg commercial IP owned by an SMSF occupied by your own enterprise.

Also for a managers accommodation in a lodge/motel investment.

 

This comes back to a question I have asked previously - is it better to by IP as an individual or as a trust or company? My wife and I want to make investments which we can pass on to the next generation so trying to figure out best way to do it...

 

You will need to discuss that with your accountant. There is a lot to be thought about when going down that path.

For me, we HAD a heap of properties in a trust & we sucked up the extra stamp duty to take them back out again. Losses are quarantined in a trust. Not saying it's bad for you, in your circumstances, but it was certainly bad for us.

 

And not much asset protection either based on my readings

 

This is something you should speak with a lawyer about. It depends.
Where is the property
do you have other property in the same state
negative or positive geared
will you potentially live in it
what happens when you die
what happens when you lose capacity
etc etc

 

almost none on some of the trust set ups that I have seen.

 

I always ask what clients think asset protection is and they mention a tenant gettng injured.

 

Whilst there may be other beneficiaries, in theory you cannot hold assets in trust for yourself.
So there will likely be no trust arrangement if no distributions were made and stuff hits the fan.
Family courts will just ignore it.

 

There is no case law to support this, in fact case law supports the opposite. see the NSW SC case of smith v public trustee.