Negative gearing on mortgage interest in family trusts.
My wife and I currently have a property owned by our family trust, of which we are both trustees. There are currently no mortgages against this property.
We are now getting an equity release mortgage on the property. We will then rent the property out for around $3000 per month and the mortgage interest will be around $4000 per month.
My question is as follows.
The property will continue to be held in the trust,* but the equity release mortgage will be in mine and my wife's names.
Can the $3000 monthly rent be offset against the $4000 monthly mortgage interest costs for the purposes of the trust's tax liabilities? In other words does the Trust sustain a loss (for tax purposes) of $4000 - $3000 = $1000?
* The Bank insists on having the mortgage in the same names as the names on the house title, and in WA the title to a property cannot be in the name of a trust.
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