Tax Tip 64: Tax Consequences of a Beneficiary Living in a Trust property rent free

Anything of a legal nature called a Claytons is probably a concern without good legal advice. They often get forgotten or people get confused about them. eg Hubby dies and wife has no idea. It may well have been a deed of apparent purchaser / resulting trust so that if a claim was raised on the property the title could revert.

A Claytons needs explanation for the younger members of PC. Claytons was a drink or some sorts in the 1970s marketed using a well known actor (Jack Thomson) using the punchline to a untold joke...Now we can all get some sleep, HaaHa...

Claytons was drink to have when you didnt want a drink. ie non-alcohol.
So a Claytons in legal / tax terms is used to describe a contract that isnt a contract.

 

Whatever it was it did the trick and he still has the house.
He is actually up to wife 3 now

Whatever it was it works. At wife 3 he still has the house and is now on a disability pension.

 

But still has a liver..and has a mate who cant tell a joke. A deed of apparent purchaser wont likely help the wife issue long term....it has limited effect.

I recall i used it years ago to help a client buy a airport rental car lot from a huge player to hide the ultimate owner... sort of like nominee provisions but longer

 

Hi Terry, what if the beneficiary pay a full rent amount, can the Trust still claim deductions for interests & outgoings?

 

This is a complex area of tax law. There is case law that says yes, maybe but it is NOT generally accepted by the ATO as permission to use that approach. Part IVA may also affect it

 

It could be possible depending on circumstances

 

Note that if the trust has made a family trust election this could create issues for the trust if the beneficiary was not part of the family group.
I will post a tip about this in the future

 

Don't forget that the trust might be able to use interest and other expenses to reduce CGT when the property is disposed of, if a beneficiary is living there rent free.