Hi, thank you for reading my long post and questions.
We set up a discretionary family trust a few years ago to purchase an IP apartment, for asset protection. We have "gifted" on 4 occasions some money to the trust offset account to help reduce the loss in the trust as we can not negatively gear a trust property. I think this year it will turn over to profit but my understanding is this profit will be offset against previous years' losses.
We have now purchased a second property which we intend to buy in the name of the trustee for this trust. We intend to live in this property as our PPOR.
My parents who are classified as non-residents for tax purposes (they currently live overseas), have offered to help pay for a large portion of this property purchase. I believe they intend to take out a loan overseas using their overseas property as security to do this.
We also intend to pay for the initial deposit from our personal account as "gifts" from us to the family trust.
I would be grateful if anyone would comment on these questions:
1. Are my parents allowed to gift a lump sum to the family trust and how does this affect their tax status?
2. What is the best way for them to gift this money from overseas? To transfer it to their personal accounts in Australia first then onto the trust account, or directly from the overseas account to the trust account? As a lump sum or separate amounts?
3. Are we (based in Australia) allowed to gift a lump sum for the deposit?
4. Will the family trust have to pay tax on these gifts, because the money will need to be in the trust account prior to settlement date?
5. Is there a "upper limit" of gift amount before the ATO will have issues?
6. How will they (and us too) prove these are gifts (not a loan) to the trust account, i.e. what documentation is considered adequate by the ATO? This is important because they are taking out a loan overseas, but do not want us to repay them. They believe it will help the family trust since the interest they pay overseas is lower than Australia.
7. As we will be living in this property owned by the trust, will we be liable to pay land tax? Will my parents be allowed to live in this property?
Thank you for your comments.
We set up a discretionary family trust a few years ago to purchase an IP apartment, for asset protection. We have "gifted" on 4 occasions some money to the trust offset account to help reduce the loss in the trust as we can not negatively gear a trust property. I think this year it will turn over to profit but my understanding is this profit will be offset against previous years' losses.
We have now purchased a second property which we intend to buy in the name of the trustee for this trust. We intend to live in this property as our PPOR.
My parents who are classified as non-residents for tax purposes (they currently live overseas), have offered to help pay for a large portion of this property purchase. I believe they intend to take out a loan overseas using their overseas property as security to do this.
We also intend to pay for the initial deposit from our personal account as "gifts" from us to the family trust.
I would be grateful if anyone would comment on these questions:
1. Are my parents allowed to gift a lump sum to the family trust and how does this affect their tax status?
2. What is the best way for them to gift this money from overseas? To transfer it to their personal accounts in Australia first then onto the trust account, or directly from the overseas account to the trust account? As a lump sum or separate amounts?
3. Are we (based in Australia) allowed to gift a lump sum for the deposit?
4. Will the family trust have to pay tax on these gifts, because the money will need to be in the trust account prior to settlement date?
5. Is there a "upper limit" of gift amount before the ATO will have issues?
6. How will they (and us too) prove these are gifts (not a loan) to the trust account, i.e. what documentation is considered adequate by the ATO? This is important because they are taking out a loan overseas, but do not want us to repay them. They believe it will help the family trust since the interest they pay overseas is lower than Australia.
7. As we will be living in this property owned by the trust, will we be liable to pay land tax? Will my parents be allowed to live in this property?
Thank you for your comments.