BUSINESS people who own their homes through family trusts are likely to be hit by both the State and Federal Government’s tax regimes.
The Australian Taxation Office has released a draft ruling on Home Loan Unit Trusts, saying it will clamp down on the practice of a family trust owning the family home.
And last year the WA Government introduced steps to draw people whose family home was held in the family trust into the Land Tax net. Those steps will come into effect in July. In some cases, people use their family trust to buy the family home.
They then pay a commercial rent to the trust and claim deductions available for investment properties.
Tax commissioner Michael Carmody said the ATO believed these deductions were not allowable and was moving to stamp them out.
The WA Government claims its land tax approach will only net $11 million from its first full year of operation and is aimed at using these sort of arrangements to minimise tax.
Barrington Partners partner Roger Sullivan said the majority of people owning their home through a family trust or corporate structure did it for risk minimisation rather than tax minimisation.
“The downside from a tax point of view is you lose the main residency exemption for capital gains tax purposes and get hit by land tax,” Mr Sullivan said.
Bentley MRI director Graeme Jolley said the ATO would only be looking at those most blatantly abusing the tax deductions.
People trying to remove their family home from the family trust or company risk huge stamp duty and capital gains tax slugs.
