All Topics / Hotch Potch / Please explain ?

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  • Profile photo of redwingredwing
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    @redwing
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    Could someone explain in the most basic of terms for me about a trust ??

    they sound interesting and apparently effective from what i’ve read herein.

    the ability to put all your properties under the one roof-so to speak and the ability to turn your PPOR into an investment also appeal to me.

    we have 3 properties, 2 IP’s and a PPOR, looking at getting another down the track, possibly a reno’, what costs etc should i be aware of??

    Any accountants or trust guru’s out there ??

    REDWING

    Profile photo of westanwestan
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    hi redwing

    if you are looking for a trust expert try Accountant Dale Datherum Goss in kilsyth Melb. he has written a couple of books on trusts. trusts are an excellent vehicle for asset protection and as tax vehicle.
    with the PPOR as a property in a trust, while it may sound a good idea you loose the CGT exemption (on PPOR) with could outway any negative gearing benifit you claim.
    i’d seriously look into a trust, most definately for IP’s
    regards westan

    Profile photo of shaunwalkershaunwalker
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    I’ve found a really good accountant here in canberra who specialises in them.
    i rang him to see about puting two properties into a trust now. he said not to bother just yet as i didnt have enough property, i told him that i intended buying more anyway so it was better to do it now. he said we would work it out when i got more IP. not sure if he is just being lazy, or running the odds that 98% of people only buy one IP and therefore i dont need a trust.

    Profile photo of The DIY Dog WashThe DIY Dog Wash
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    quote:


    not sure if he is just being lazy, or running the odds that 98% of people only buy one IP and therefore i dont need a trust.


    This is a fair assumption but the other possibility is that you don’t just put a house into a trust, you sell it to the trust from your name into the trustees name. This triggers a stamp duty and CGT event(and no you can’t sell for $1, it has to be fair market value).

    Also if you have shares and want to put them into the trust sell them when the share price goes below your purchase price, that way you don’t pay CGT and you can carry a loss.

    Cheers
    Leigh K[:D]

    Carve your own path and lead the way …

    Profile photo of Still in SchoolStill in School
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    Hi ENJOLady, does that also apply for selling property lower than your purchase price?

    cheers
    s.i.s

    Save on a regular basis
    “People forget that by saving just $3 per day and investing it sensibly over a working life, you’ll end up with around $1 million.”

    Profile photo of RugbyfanRugbyfan
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    There are many states that bung on land tax from the first dollar of an IP (NSW is one), if you purchase or have properties under a trust. I looked into this only a month ago and was informed by the accountant that unless you were over the land tax thresholds in the relevant state, it would not be worth putting it into a trust.

    Oh…. I have just looked it up

    NSW – no threshold ($260,999 for person)
    QLD – $170,000 threshold ($275,997 for person)
    VIC,WA,ACT,TAS,SA – OK for trusts

    Profile photo of MonkeyMagicMonkeyMagic
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    I’ve heard that the cgt discount from trusts may soon disappear and that trusts will become more like companies????

    Anyone else heard this??

    Josh

    Profile photo of lidfestlidfest
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    i spoke to an accountant today and he said that the cgt discount will continue, will get more opinions soon. good point about the land tax. he also brought this up so its something to consider. to get to that 260k threshold do all your properties add up together or is it taken per property? does anyone know the amount charged as land tax then if it starts at the first dollar? example on 100k prop would be good.

    Profile photo of pinit2000pinit2000
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    quote:


    I’ve heard that the cgt discount from trusts may soon disappear and that trusts will become more like companies????

    Anyone else heard this??


    Doubt it… as long as politicians make the rules I think we are safe… they are the ones that use these structures most, I am told…

    Pin

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    Profile photo of redwingredwing
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    R.Kiyosaki
    talks about the effective usage of a ‘company’ in his book, i presume as things are slightly different in Australia a trust would be the correct vehicle.

    Just started work with a new partner tonight and her sisters a partner in an accounting firm… what are the chances huh

    Melbear suggested ‘Trust magic’ book and i’m looking at purchasing steve’s ‘wealth guardian’
    the issue is an interesting one and it’d be interesting to see the costs associated with transition of the properties as i don’t plan to sell them anytime soon.

    REDWING

    “The man that thinks at 5o as he did when he was 20 has wasted 30 years of his life”

    Profile photo of melbearmelbear
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    Shaun, if you delay longer in selling your IP to the trust, chances are it will go up in value, and you will pay more CGT. And more stamp duty on a more expensive property. something to be very aware of.

    As for your PPOR, that’s not a huge issue CGT wise, but is for stamp duty, and is if you are looking at renting it from yourself.

    Just to clarify Rugbyfan’s point about Land Tax in ACT. There is NO threshold for anyone who has IPs. No matter what the value is, you pay the tax. They don’t add the values of the properties together though – it’s a levy on the particular property, no matter who owns it as IP.

    Cheers
    Mel

    Profile photo of StrikerStriker
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    But hang on…..what are the underlying benefits of putting the PPORs & IPs into a trust? Do trusts pay less tax than individuals on the highest tax scale? Or is it to protect the assets in the event that you go bankrupt?

    James

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    Profile photo of melbearmelbear
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    James, trusts don’t actually pay tax. You can reduce the tax payable by distributing to beneficiaries on lower brackets.

    There are heaps of advantages for trusts, tax minimisation and asset protection wise. For a really good, plain english explanation, get Dale GG’s Tax Battles and Trust Magic.

    As has been stated, a disadvantage is that trusts do not recieve land tax thresholds, and no CGT exemption on selling PPOR. If you don’t plan on selling your PPOR, then of course, that isn’t a problem.

    Cheers
    Mel

    Profile photo of lidfestlidfest
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    also, if there are no beneficiaries that pay less than the highest margin of tax it may be worthwile to set up a company to be the trustee. the profits can then be distributed back into this company and pay tax at 30%.
    you can be the director of the company so you control what the trust does. about $1000 to set up the company ive been told.

    Profile photo of melbearmelbear
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    If your trust deed is written well, any company that any of the primary beneficiaries are directors of are also beneficiaries of the trust. It doesn’t have to be the trustee company.

    Check out Dale GG’s manuals on Trusts. A must read.

    Cheers
    Mel

    Profile photo of redwingredwing
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    A confusing topic and from the posts definetly worth getting the right accountant and right structure put into place.

    A trust could be benificial as we’re planning additions to the family and with one partner off work it may be worth it.. it’ll be interesting to see the figures laid out in a ‘for’ and ‘against’ argument with a competent accountant

    REDWING

    Profile photo of StrikerStriker
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    Is there any way possible to transfer properties already in a personal name to a Company or a Trust without incurring hefty fees?

    James

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    Profile photo of The DIY Dog WashThe DIY Dog Wash
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    Hi Everyone

    Funny how trusts always draws a big discussion. I find the info really interesting and have found it much more simple than it first appears. There is SOOOOO much that you can do with a trust and buying Wealth Guardian and Trust Magic are essential before settingup your trust.

    quote:


    Hi ENJOLady, does that also apply for selling property lower than your purchase price?



    Yes, it is the same thing, it must be fair market value or the gov still sharge based on the FMV.

    quote:


    unless you were over the land tax thresholds in the relevant state, it would not be worth putting it into a trust.



    Certainly in Vic we can put our IPs into a trust until they are just below the threshold and then start a new trust and this helps to minimised teh tax charged to us under the land tax act. Of course capital growth means this may put the trust portfolio over the threshold … Oh well.

    quote:


    I’ve heard that the cgt discount from trusts may soon disappear and that trusts will become more like companies????



    Pin is right, alot of people worry that trusts will be abolished or changed etc, but all pollies have them so they are pretty safe in that respect. Also with CGT discount it only applies if the beneficiary is a person.

    quote:


    Shaun, if you delay longer in selling your IP to the trust, chances are it will go up in value, and you will pay more CGT. And more stamp duty on a more expensive property. something to be very aware of.

    As for your PPOR, that’s not a huge issue CGT wise, but is for stamp duty, and is if you are looking at renting it from yourself.



    Don’t forget that you don’t “have” to put your existing properties into the Trust it can occur as you buy and sell, we have two props outside of our trust one is our PPOR, we are selling both of those as a result of a life change so they will no longer be an issue for us.

    quote:


    also, if there are no beneficiaries that pay less than the highest margin of tax it may be worthwile to set up a company to be the trustee. the profits can then be distributed back into this company and pay tax at 30%.



    Unfortunately you can end up being double taxed doing it this way as the compnay pays 30% and then the person receiving the money pays at their marginal rate. But you are all forgeting or maybe unaware that tax is only paid on money after post tax expenses have been deducted … this mean your tax can effectively be less than 10%. Also distributions to beneficiaries is discretionary so the highest tax payer doesn’t have to have any benefits paid to them it can go to the kids, partner parents etc.

    quote:


    Is there any way possible to transfer properties already in a personal name to a Company or a Trust without incurring hefty fees?



    Sorry NO.

    Daisy Girl arranged a talk by Dale GG last week and it was highly valuable, so if you get the chance go to see him talk about trusts. Otherwise get a hold of Steves book first it really gives you the basics about all types of investing structures available to you and then explains a trust in the most simplest way. Then get Trust Magic if you still think it is for you. Basically Trusts are for anyone intending to buy more than a 1 or 2 properties.

    This ia a really good thread keep the questions coming as I think a lot of people will get good advice out of it.

    Cheers
    Leigh K[:D]

    Carve your own path and lead the way …

    Profile photo of melbearmelbear
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    quote:


    Unfortunately you can end up being double taxed doing it this way as the compnay pays 30% and then the person receiving the money pays at their marginal rate.


    This is true, but the company can then choose when it wishes to distribute this money. It can wait until there is no income for any of the shareholders (which may be on retirement), and the franking credits all then apply.

    In the meantime, the money can be lent back to the trust, and it can continue investing. I would only distribute to the company once all other beneficiaries are in the higher tax brackets. With my number of beneficiaries, that probably ain’t gonna happen[:)]

    I’d really recommend Trust Magic by Dale GG. There are so many after tax expenses that can be bought by the trust pre tax that he explains. Music CDs, Chocolate bars, travel allowance, any number of things. You could end up having bought things you usually buy anyway, tax free, and having no tax to pay on the trust income as it has all been ‘expended’.

    Cheers
    Mel

    Profile photo of VaslavVaslav
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    @vaslav
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    hi redwing,

    i suppose you’ve been bombarded enuf with infos on trust by now.

    Dale’s Trust MAgic is a must read.. i’ve just purhcased it and it has just arrived in the mail. Very good book, plain n simple to understand. 99 including postage n handling, a small price to pay for such a Wealth of information.’

    Kev

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