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  1. #11
    Join Date
    Mar 2015
    Location
    Brisbane Wellington Auckland
    Posts
    764

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    Quote Originally Posted by Anthonyacat View Post
    Looks like Fantatical's opinion disappeared? I never saw it.

    Anyway, you may have missed that Rosco is himself a property accountant. Or that was a subtle joke your reply?

    It sounds like you need to speak to an accountant about your overall situation. You should contact Ross or myself directly, or any other publicly practicing Chartered Accountant - ideally one who owns property themselves. But to answer your specific question, if you buy the house in your own name you can still use the trust rent to contribute to the mortgage repayments, from both a cash perspective (just take the cash from the Trust as Drawings) and a tax perspective (operate the property at a loss in your own name, and attribute some Trust tax profits to yourself at year end).

    Regarding running rentals at a loss, Ross was referring to extracting equity from existing rental properties, to pay yourself so that you can buy your personal home using debt that is then deductible to the trust. This increases interest expense and so decreases the profit, or creates a loss if expenses exceed income. If the properties are owned a in trust this loss is 'stuck' inside until used up in future, instead of being available to you to offset against other income and get tax refunds. Short term this isn't a problem, but there are situations out there where people have hundreds of thousands of dollars in tax losses stuck inside a trust that they may never get the benefit from.
    If the Trust has tax losses stuck inside is the best way to free them by having income
    Example's
    1: purchasing a property that produces a profit
    2: interest bearing loans to another entity
    3: management fees charged to manage properties
    Etc etc

  2. #12

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    Sincere apologies Anthony, I stumbled across this website and did not take note of who's who here, so absolutely no subtle jokes intended.

    Thanks for the valuable advice. I do have a chartered accountant, but he's not a property accountant and is away at present, so I have been endeavouring to gain a better understanding of my situation through this site, in order to know where to direct specific questions to him.

    So, in summary, I could buy my ex's share of the joint property in my own name, use the income from the trust as drawings to help pay the mortgage on it, then use the equity in both my rentals to buy myself a property to live in. (I don't fully understand the debt being deductable from the trust, or how the expenditure would exceed the income however). I presume then, that this could be a source of income for me while I plan my next venture, which is going to take a while to get off the ground at which time I will have no other income. Many thanks.

  3. #13
    Join Date
    Oct 2013
    Posts
    1,601

    Default

    The use of equity in the rentals to buy a personal property wasn't previously discussed, and won't be tax efficient using the above structure. While you can most likely still do it, the debt used to purchase your private home will be non-deductible.

    Great move coming to the forum to get a better understanding of things, but best to talk to your own accountant about specifics and structuring. Or if you're not confident in their ability, you get a one-off consultation or switch to another firm in whom you do have confidence.
    AAT Accounting Services - Property Specialist Accounting - AATAccounting.co.nz
    Lower fees for investors, traders & real estate agents!
    [email protected] for more information.

  4. #14

    Default

    Well Anthony, I would very much appreciate a one off consultation to point me in the right direction, although shifting accountants is not going to be an easy task at this juncture, unfortunately. I will email you directly. Many thanks


 

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