Greetings Gurus,
I know I’m going to sound like a newby, it’s because I am. But I’m also the type of person who needs to understand, as I do believe the “the devil is in the detailâ€
I’ve been trying to establish a structure for our investment and business goals for ages now, and I keep getting unclear or incomplete information. Everywhere you read the advice is always “get your structure right from the beginning and save $ on changing laterâ€. All very good, but determining and getting the “right†structure is apparently harder than first appears!
But first a whinge!
Everyone always says speak to your accountant about your particular circumstances. So far we have spoken to 2 accountants! (I was going to arrange a telephone conversation with a third until I was told it would cost $330/hour!)
The first accountant did not understand why we wanted to go to the expense of setting up a trust and corporate trustee. When we said that we wanted to buy investment properties, he suggested we buy in our own name for –ve gearing benefits. We said we wanted +ve geared investments and he condescendingly said “where do you find those?†– so we closed that meeting early! [grrr]
The second accountant did not want to commit! He seemed overly cautious and said, “well if you want to, a trust structure would provide best asset protection†(what a genius!). I’m looking for advice; don’t hide behind the fear of litigation! Lets have an open back and forth discussion! I don’t make uninformed decisions. [grrr][grrr]
I rang our lawyers and asked if they setup trusts and companies. They apparently outsource this (as did both accountants!).
Whinge over
So I decided that if they outsource, why can’t I just outsource it myself. So I’ve looked at “LawCentral†and ACIS.
However after reading Dale Gatherum-Goss’ “Trust Magic†where he suggests ensuring that the trust has clauses to allow the trustee to purchase and sell any investment, allow the trustee to borrow, raise money, secure mortgages, etc. So then I was in the dilemma of whether these standard on-line type trusts did provide the flexibility and security I wanted.
Then we come to the structure itself. It had been suggested to me to have a 3-tiered structure, (corporate trustee for a discretionary trust, whose beneficiary was a family trust.) The idea was to have multiple discretionary trusts that would all lead back to a single family trust. Other than setup costs and on-going costs, what are the disadvantages of this structure? From an account keeping point of view and a tax benefit stance? Is there any real advantage?
If we don’t go for the 3-tier structure and stay with a 2-tier structure (corporate trustee and family trust), how many family trusts can you have? If as suggested, you create a new structure once a nominal asset value is reached.
Cheers 4 now
And thanks for any direction that can be offered.Michelle
I think the Family trust is a bad idea. It limits your tax advantages. If you have lots of trusts directing income to a family trust, then the family trust will have a large income eventually. As family trusts can only distrubute to family members, how much can it earn and keep tax under 30%?
This is not something I would do. A corporate trustee and discretionary trust would do everything you want, and giving you the option of using a bucket company to offload excess income capping tax at 30%.
If we don’t go for the 3-tier structure and stay with a 2-tier structure (corporate trustee and family trust), how many family trusts can you have? If as suggested, you create a new structure once a nominal asset value is reached.
How many do you want? I know of no limits. I would keep business in a seperate structure from your IP’s, but how many trusts do you need. I have seen 50 from one corporate trustee (what a pain at tax time)
E-mail me.
CATA
Asset Protection Specialist
[email protected]Michelle,
I could very well be the person who quoted $330 for the hour consultation as I do charge that. Fees are always a difficult thing. If your accountant is well versed in trusts (hybrids, unit and discretionary trust), understands family trust elections and interposed entity elections and is able to ensure that you are structured well from an estate & retirement planning, asset protection and taxation flexibiltiy perspective then it does set that accountant from the majority of practitioners.
I know many clients who who told never to purchase in a trust but were never told about hybrid trusts (purely because the majority of public practitioners do not understand how they work). I have seen new clients recommended into companies for purchasing residential property (even worse as you lose the 50% CGT discount) and generally given very poor advice.
As the old adage says “you get what you pay for” most of the time. Sometimes however I do agree people get ripped off. To give a comparison though the Big 4 and medium tier accounting firms charged their partners out at $550 per hour.
But at the end of the day it is you who has to pay the bill.
Hi BeauMonde,
I’m in the same boat. I have been trying to understand how to find the best structure, and trying to get advice…but, are they telling you the ‘right structure’, or just the one that is best for them…
Please do provide feedback here, when you finally find the best option. Anyone else out there able to provide help, that would also be great!
Much appreciated,
gabs!Hi BeauMonde,
Great Question..think you’ll find that question is one many of us have.
From the replies I have read, on other posts, Cata seems well versed in the area so it would be worth sending him a msg.
On that subject can anyone recommend a high calibre trust accountant in WA (besides Chriss Batten of course)? It would seem somone who can answer the above is worth their weight in gold!
For general entertainment value, I can add this – I have asked enough experts to have been professionally advised to have just about all basic structure types! Own name, trusts, company, ….depends on who you’re talking to. (yes, I did pay for each professional’s advice *!?*#)
The latest advice (free of charge this time) is the one I’ve taken. When I have been able to prove myself to be actively investing in Australia, then set up a structure here. Apparently lots of people have great intentions and then after not using their company, corporate trustee, trust, etc but paying fees annually, they then want to get rid of the un-used structure.
I found the confusion about exactly what would suit my personal circumstances was holding up my progress, and now the plan is to assess the appropriate structure at the time of each purchase. Apparently it can all be set up quite quickly. From my reading I think I know the structure that’s right for me now.
[tired]hi all
couple of things I hope all this structure building is helping you to understand what you want to do with the structure and how it is able to change, to market change.
and I’m glad that a moderator didn’t lock this thread at that blatant advert for coasty mike with his cheap rates and trying to bump up to $550 an hour but I do think both mike and cata would be worth that type of money as mine (robert)charges in that mark anyway.
in asnwer to your question it is relatively easy.
first you must be confident that the person you are dealing with understands what they are doing, if in this case structures ask them as many question as possible, if I bought this, I built that, I married this, I got divorced, a guy falls off the roof on my ip etc.second cost
yes 300 is alot of money but if you spend 5 times that to get the advice
one 500k property if you had because of wrong structure to pay 50% cgt or just stamp duty because you have to sell internally to another structure sduty alone is 27k a saving of 25.5k and forget cgt as I cann’t work that out unless I know the growth in the areayou bought.
so yes it is expensive but for all those would be developers out there the most expensive part of a development site is the foundation,
and you are looking at a foundation here and no I don’t walk up to some one on the street give them a shoval and say start digging to do the foundations I get a professional excavation team in and professional concretors in and do it right.
that is what you need for you structures foundation and my concrete or excavation guys charge alot more then 300.
these boards are very good for opinions but some times just like everything even in china you must pay
rates are only part of it .
make sure you still do rule 1
and I no guru this is.
my.002here to help
If you want to get involved in some of the projects I’m involved in email to [email protected]Michelle,
To start off, a simple company/trust structure would be sufficient. Then when you are more comfortable with the operation etc, and wanting to buy more properties, then you can look at additional trusts. There is no real tax benefit of having multiple trusts, it’s more of an asset protection issue, diversifying risk. But as with everything, you should speak with an accountant that you are comfortable with and confident in to ensure that your setup is the most suitable. Although you can just buy the trust/company online you have very little tech support or comeback if you do the wrong thing. Better to spend the money upfront for some good advice.
You can email me [email protected] for any more detailed info/advice.
I can suggest a great accountant for you if you’d like……..me, or I know of some others that may suit also.
Thank you for your contributions. A lot of what has been said makes sense and does clarify some of it for me. [biggrin]
1st up – cost of consultation
I didn’t realise this would be such an issue; it really was just an aside.[blush2]I do believe that you pay for knowledge, either in dollars or in time/experience. I have no objection to paying a fair price. There was more to the situation than me contacting an accountant for a consultation. I had attended a seminar where this firm had spoken. At the end of their segment they had said, if you have any questions please email us; we would be happy to help.
So I had emailed them explaining that I had been to this seminar, that I had mostly determined my structure but that I had one question I wanted clarification on. I had a fair idea of the answer (but again the devil is in the detail). The question I wanted clarification for – “can the appointer also be a beneficiary?†A yes or no answer really. They either can or they can’t. I didn’t ask should, but can.
They emailed me back saying to contact their office to arrange a telephone conversation. Which I did. When I was making the appointment, I asked what the cost would be (recognising that this was their business – I didn’t expect it for free). It just seemed a little expensive for what I consider to be a simple question. “Happy to help†(ourselves to your wallet!)
But if they all outsource this service, (and this firm did, I had already established that) how can they guarantee what the wording of the trust deed is going to be? I’m tempted to type it up myself (ugh – RSI!)[puke]
(And just aside, does this mean a yearly gross income of $600k+? – (330*40*52))
I’m with you grossrealisation, getting the foundation right is important, which is why, I’m reading and asking questions. I’m eager to start, but I want to start right. Having said that are you using the same excavation contractors you used on your first project? Or have you shopped around for the best service and price (note service before price!)
Cheers4now
MMichelle,
That’s a fair request. Being charged $330 to answer that simple question is, in my opinion only, not reasonable. I now know it’s not me because noone has called to ask me that question.
Gross, no blatant advertising for my firm. Just making comments on the fees. $330 – $550 per hour is the standard charge out rate for partners in accounting firms these days. With respect to profits you need to take into account overheads costs, etc but are partners earning over $500K per annum ? Many of them are. If I wanted to I could be relaxing in the Cayman Islands on a yacht but I couldn’t think of anything more boring so I choose to work. Since I have the choice I ensure my time is worth the effort.
Anyway that’s my thoughts in relation to fees. As Gross says a good accountant will help you build your business, structure things from a tax effective and asset protection point of view and in the end hopefully help make you wealthy.
hi BeauMonde
yes it does seem excessive for a question and its easy to say bye.
and no got a couple of excavating companies and yes I do check pricing on each and every job.
coastymike was doing so well until he mentioned Cayman Islands on a yacht.
whats wrong with vanuatu ??? closer and cheaper
but I digress I hope you find the company to setup your structure and ask as many questions as you like because you need to.
the yacht is a very good thing to aim for.here to help
If you want to get involved in some of the projects I’m involved in email to [email protected]Hi nylorac,
What is the advice that has helped you come to your conclusion, and where did you find it?
Cheers.
In reply to gabsman
I purchased and studied “Wealth Guardian” from propertyinvesting.com and “Trust Magic” by Dale Gatherum-Goss
Then I asked one of the authors some questions.
[upsidedown]
I think before going to get some advice, the best thing you can do is read up on the topic – books, forums etc.
That way when you go in there, it won’t all go over your head, and you will be able to understand – at least a little.
You will also have an idea on whether the person knows what they are talking about.
Terryw
Discover Home Loans
Parramatta
[email protected]
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Just send me a blank email, with “subscribe†in subject line.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
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