Howdy. I’m new to the forum. Just finished Steve’s book, and worked thru Wealth Guardian. Some big “wow” moments for me as I worked thru both. The issue of structuring, in particular, has me VERY concerned about my current IPs.
My situation: 3 IPs to the value of $1.25m, with a debt of $500k. That’s the good news. The bad news is that they are all held in a company structure. All properties have experienced substantial growth in the last few years. I have this terrible feeling I’m sitting on a ticking CGT timebomb…
My question: Is there a simple, cost-effective, means to transfer ownership from the existing company to a trust – with the company then assuming the trustee role? I obviously would like to avoid triggering a CGT event, but I have a sense this may not be possible… [
]Any assistance from someone who has travelled this path (or a better one) will be much appreciated.
Many thanks.
Fireball.
Hi fireball and welcome
Someone once suggested quite a while ago to set up a trust, have your company as trustee, and then say that the company was merely holding them ‘as trustee for’ the trust anyway – it would be in the companies name in that case.
I think the fatal flaw though is that the trust would have needed to exist BEFORE the properties were purchased.
I suggest you find a very good accountant, and ask them the best way for you to move ahead. I think there is no easy answer.[V]
Cheers
MelHi Guys,
There is a way to move the properties from Company to Trust, I know you can move properties from one trust to another trust, yet this is very expensive and most the cost goes to legal system, which is very hefty in price.
Sorry for not much help, but it can be done.
Cheers,
sisYes, I think any transfer to a trust would be classed as a sale, and then stamp duty and CGT. A good way to avoid CGT is to simply never sell. Make sure you get some good advice before you buy anymore properties.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
My thoughts were along the same lines as Mel, in a trust the trustee is the technical owner of the property so if the company became the trustee would the company assests flow onto the beneficiaries.
Please let us know how you go with this as it would be of interest to many people I am sure.
Cheers
Leigh K[]Carve your own path and lead the way …
Thanks for the comments folks. Appreciated.
Mel: as the trust will clearly post-date the company structure – I may not have the option available to me.
SIS: You seem to indicate that it is possible, but don’t elaborate. Any more info..?
Terry: Holding the properties inside the company indefinitely (and ensuring all subsequent properties are purchased under a more tax-effective structure) is certainly an option. Unfortunately, the intention has always been to sell one of these properties within 10 years – as I purchased it with a partner based on this verbal agreement. Yes, another learning about structuring… [
]If there are any other ideas out there on painlessly transferring between structures they will be gratefully accepted.
Cheers.
Fireball
Don’t run on slippery surfaces.
Look on the bright side – at least the capital gain will only be taxed at the company rate of 30%.
If you’re in the top marginal rate of 48.5%, even if you had the benefit of the 12 month CGT concession, your concessional tax rate on the capital gain will be approximately 24% Which is only a difference of 6%.
Besides, if you’re going to have a CGT bill, it means you’re actually making money!
I hate to tell you this, but I don’t think that there is an easy way (maybe no way at all!) to get the property transferred out of the company without copping both CGT and stamp duty.
If you want to hire a professional to help you with this, don’t waste your time with a “GP”-type. You’ll need to track down a top tax accountant or lawyer, the type whose client list reads like BRW’s top CEOs, and be prepared to pay at least a few grand for the possibility (NOT certainty) of finding a solution. I’m just being realistic, not pessimistic.
Besides, even if you manage to transfer the property “painlessly”, you’re going to need to hold it for another 12 months before you’re eligible for the concessional CGT rate. Does that work for your selling timetable?
Cheers
Elysium-MHi Fireball,
Elysium-M very well sumed it up.
Cheers,
sisFireball, i agree with Elysium. It is not the end of the world, and may work out in the end.
In the meantime, to divert the rent to a trust (if you need to?), you could rent to a trust at a lower rent and then the trust could on rent to the tenant at a higher rent, making a little profit.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hey Terry, that idea of yours sounds quite clever! I guess it’ll be a case of you renting the property to the trustee of the trust for say $50 per week, and the trustee sub-leasing the property to a tenant for $120 per week, which means that the extra $70 will be trust income, giving you the flexibility to distribute it in a tax-effective manner.
Cheers
MelvinMelvin
That’s it. Don’t know what the ATO would think of it??
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi There,
I am not sure if this helps but …. I would not be too concerned about CGT unless you are selling for some reason. I would be better thinking of the 3 IP’s as the “Funding engine house” – unless they are seriously -Tve Geared – to all future properties by cashing in on the equity of them all and getting maximum leverage to repurchase into a better structured legal property solution. I would (and Have) set up a Hybrid trust with a PTY Ltd as the Trustee of the trust …. you will then protect any future issues with any new purchases. Check out your options with your specialist team of advisors. I guess the moral of this story is …. :you only lose out with CGT if you sell up as it is not technically realised CGT … only theoretical -IE the GOVT can not touch it until the coffers are open (Title changes hands again) – You may also have this as an oportunity at some time in the future when you are a mega billionaire ….. you could transfer title to get a tax loss written off. Again get your pro’s to give advice…
Cheers – Kiwi Abroad –
]
]
]
You must be logged in to reply to this topic. If you don't have an account, you can register here.
