Trust or LAQC
Question from Byron updated on 22nd February 2011:
Our expert Mark Withers responded:
If the property is producing losses even without depreciation the LAQC should be able to flow these losses back to the shareholders and allow them to be claimed. A trust though canno't distribute tax losses so often not seen as appropriate unless it has other income to offset losses against. A trust offers asset protection though where you company does not.
If I understand you correctly, your second question relates to billing your contracting income from a trust. This will have no tax benefit now that the trust and personal rates are aligned at 33%. The trust assets would also be exposed to the business risk. Attribution rules also still apply if you are predominately billing one customer. IRD are also taken a keen interest in the inappropriate use of trading trusts in light of the Penny Hooper tax avoidance tax case that is topical at present. I'd suggest you use a more conventional arrangement for your contracting.
Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.