Hello everyone, I'm thinking a trust makes sense for me later rather than now, but I've never used one so I'd like any tips. Here is a hypothetical scenario; Mario and Raffaela are a couple Mario earns $130,000 Raffaela earns $70,000 Mario owns 2 properties. 1 investment. 1 PPR Raffaela owns none. They can see the benefits of owning a unit trust or hybrid trust 1. They could income split easily. 2. Asset protection. 3. The trust could still discount negative gearing 4. There would be a CGT discount after 12 months. 5. Transfer of the property into the trust would incur a lowered stamp duty from 4% to 0.6% What concerns me most is Finance Financing a trust. I would be interested to really know what the likelihood of accessing finance would be. I believe there would be fewer options and a lower LVR available to finance a trust, possibly putting the brakes on Mario's ability to grow the portfolio (or trust) Additionally, the ability to claim losses sounds like it could get a bit tricky where it would be limited during some years and therefore have some lost savings. In this situation, could it make sense to set up the trust later, after the growth phase? With knowledge that the income split savings would be lost and there would be some penalty in stamp duty for transferring the properties into the trust. Don't say it depends - of course it does. The question is really asking, is it possible and arguably worthwhile, and is the understanding correct? It seems to me that Mario and Raffaela have a better chance to grow their portfolio out of a trust, due to the availability of finance, in the face of the drawbacks of not using a trust. Please comment, tell me where Mario has it right or wrong and any ideas for Mario and Raffaela would be appreciated. Thanks
1. income split easily. not with a unit trust. the distribution of capital and income is based on unit holdings. hybrid trusts in my opinion are the same. some promoters were claiming that you could distribute income to the special income unit holders and capital gains elsewhere. ato has indicated that these arrangements dont work. we have writte a book on many of these issues. just shoot me a pm and will send it to you or you can download direct from our website
The finance issues surrounding trusts are far more complex and sometimes difficult. For example you would have buckleys chance of a lender working with a hybrid trust. Almost no lender allows hybrid trust loans due to the ATO concerns and risks for bank equity / mortgage if a tax liability arises due to misuse of a trust arrangement.
