Property and Service Trusts

Discussion in 'Accounting & Tax' started by Mike A, 23rd Nov, 2017.

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  1. Mike A

    Mike A Well-Known Member

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    recently had a discussion with a fellow colleague and they were telling me about a client who has a service trust which charges management fees to other associated trusts (all holding properties) for management fees, etc. my understanding not a large business about 4 or 5 properties with one in each trust.

    be very careful of such arrangements as the recent PBKQ case may well deny such a deduction.

    questions you need to ask are why is such an arrangement in place. if you have commercial premises with staff in such a service trust and charging that to your professional business i understand.

    but managing your own properties in other trusts and charging service fees across ? you may well find under PBKQ it isnt deductible.

    and thats before even considering part iva
     
    Paul@PAS and Ross Forrester like this.
  2. Terry_w

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

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    Yes and certain real estate licences may be needed too if different entities other than the owners are collecting rent etc
     
  3. Paul@PAS

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

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    Ditto paying a spouse to "manage" your properties or do records etc may not deductible. Rent is considered a passive return for ownership. You dont necessarily incur costs for admin etc as its not a business. Its an investment. And likely a Part IVA scheme to shift income from a higher income earner to a lower (no) income earner spouse. Also Part IVA scheme perhaps ? The Commissioner can also cancel the tax benefit in any year - No time limit.

    One issue surrounding the recent depreciation changes is that company ownership is excluded. Putting aside the CGT issue of companies a company may be a excellent vehicle for some property ownership. But it comes with caution. Many believe a company is a business. Its not. Its a structure. A legal existence separate to that of the owners of the company. I fear some may soon see merits of companies and mistakenly think they have a business when ta company may not be a property business. And not likely to be small business either (attracting the 27.5% tax rate).

    All reason why a simple question to a property savvy tax adviser can be so valuable. What seems complex to taxpayers can be quite simple, fast and perhaps just on the fly advice without further costs.