Web Specials

Hybrid Trusts under the spotlight

What does the latest Taxpayer Alert from the Tax Office about the "uncommercial use" of hybrid trusts mean for property investors who use this structure?

At the end of March the Australian Tax Office (ATO) released Taxpayer Alert (TA) 2008/3 which detailed its concerns about the use of some hybrid trusts. It refers to the "uncommercial" use of certain trusts and describes "a non-arm's length arrangement under which a taxpayer uses borrowed funds to acquire an interest, such as units, in a certain type of trust, which uses the funds to purchase income producing property. The arrangement seeks to provide income tax deductions to the taxpayer for all of their interest payments and their borrowing costs. The arrangement does not provide a sufficient connection between the expenditure and production of future income and/or capital gains, which may be distributed to other beneficiaries of the trust, who may have a lower tax rate".

In this web special, which continues on from the article in this month's API magazine, three accountants share their views on hybrid trusts and this tax alert.

Click here to read Julia Hartman's comments
Click here to read Ed Chan and Ken Raiss' comments

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