FAQ 5 Will I be able to claim losses if a property is owned in a trust

The expenses/income for Properties owned by trusts are separately accounted for when the trust does it\’s tax return. The claims are made by the trust and have no connection with any personal claims that we might have.

Properties held in a trust will quarantine any losses that are incurred. These losses remain in quarantine and are accumulated for each year that the losses occur. Ultimately when a trust owned property makes a profit( cash flow positive) then the losses accumulated will be used to offset these.
We all want to benefit from  properties which will be cash flow positive so there is only a question of when rather than what can be claimed.

Because we have been asked many times about the effect of depreciation claims on cash flow distribution,  we have put together a spreadsheet
which illustrates the principle of how it all works

CLICK ON THE IMAGE ABOVE TO ENLARGE IT 

Looking  at the results of this investment it can be seen
that throughout the whole 5 years there has been NO income to distribute (on Paper)
however in reality the trust Bank Account balance has been growing. In addition the
value of the property has also been growing. In all probability the accumulated loss
will start to diminish in year 6 and continue to do so until the income eats up of of it.

These accumulated funds are owned by the trust so as such they could be used to pay down the LOC loan and hence reduce the interest paid.

A better option would be to loan these funds to another entity to continue investing.

Michael & Sara
Ultimate Coaches
The information supplied is general only and not intended to replace professional advice. We recommend that you discuss trust accounting with your accountant.