Hi everyone
At the moment, I have 1 -ve geared IP, and I've put down a deposit on a second one in the heart of the Melbourne CBD which doesn't settle till November/December 2008.
I'd like to kickstart my investment empire into overdrive, and to do that I think I'll need some sort of business structure to manage it, but at this stage I'm still feeling around in the dark. Does anyone know of any good sites / resources which would describe the different business structures.
Is it even worthwhile setting up a business for this purpose if I am the only employee?
Your input would be much appreciated!
Happy holidays!
KurtKurt,
Have a Happy New Year.You need to talk with your accountant to get specific advise on setting up a Trust and whether it would be an advantage to have a company control the trust or an individual tax payer.
https://www.propertyinvesting.com/resources/products/11I lot of different opinions regarding this. Some very successful investors buy only in their own name while others buy through trusts. Margaret Lomas, who has over 35 properties, only buys in her own name as she doubts whether she will ever get sued. Even accountants have different opinions. You have to balance up the cost of setting up a trust with the possibility of getting sued.
I was going to set up a trust but now have decided to buy only in my name or/and my wife's name.
Thanks for the feedback guys! Hleung, if I might ask, what turned you off setting up the trust? Was it just the costs involved?
Kurt
You certainly wouldn't need or want to set up a Business to buy your future IP's unless of course you are wrapping or providing other vendor finance offerings.
Establishing a Trust structure has many pluses and minuses but cost certainly shouldn't be a deterant.
For a standard Discretionary / HDT / Unit Trust we normally charge around $600 and if you wanted a Corporate Trustee then you are not looking at much more again.
Asset protection is one aspect however income distribution once the properties become + geared is another.
It is horses for courses and there is no right or wrong answer. I have a substantial portfolio and hold my properties in a variety of Trust structures but this is not for everyone.
Richard Taylor | Australia's leading private lender
Problem I see with all those trusts mentioned is they have a vesting date i.e. an end date and therefore a CGT trigger for someone (maybe you will be dead but someone!), imagine the Capital Growth and subsequent tax on a 50 yera property hold that you are forced to sell because your trust is at an end!
I use a hybrid DT with no vesting date (thats what I beleive you are looking for) so I perpetually pass on my assets to the next generation without triggering a Capital Gains Event.
Its a long term tax planning view but one that I feel is very undermanaged. Also handles all the asset protection, -ve geared bits you need.
Also, I do not hold more than 3 properties in each trust depending on size for further protection.
Hope that helps.
My advice, get professional advice
Know what your goals are, what your planning to do and ask someone who's job is to explain this to you.
Then the decision is yours and no one can influence you.
Good luck
Sean
philbamback wrote:Problem I see with all those trusts mentioned is they have a vesting date i.e. an end date and therefore a CGT trigger for someone (maybe you will be dead but someone!), imagine the Capital Growth and subsequent tax on a 50 yera property hold that you are forced to sell because your trust is at an end!
I use a hybrid DT with no vesting date (thats what I beleive you are looking for) so I perpetually pass on my assets to the next generation without triggering a Capital Gains Event.
Its a long term tax planning view but one that I feel is very undermanaged. Also handles all the asset protection, -ve geared bits you need.
Also, I do not hold more than 3 properties in each trust depending on size for further protection.
Hope that helps.
Hi Phil
I agree that it is a worry having your assets in a trust with a limited life.
Are you confident your trust will hold up in 80 years? I know there is a firm promoting these sorts of trusts which supposedly do not end, but I was speaking to a solicitor specialising in trusts and he said the law was unclear on this area and that it was a weak argument.
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
I agree with Terry.
If the asset purchased today is held for another 80 years I will let my kids worry about the legal issues because i doubt i will be here to get involved.
Richard Taylor | Australia's leading private lender
Interesting post.
As an accountant, and an ex-auditor, I've seen first hand enough fortunes sunk to never want to own assets in my own name.
There is no perfect structure, but some options are better than others. Individuals pay the highest tax, partnerships are dangerous from a unlimited liability viewpoint, trusts are complicated, companies don't get access to the CGT discount, super funds can't borrow (well, that's now open to debate). That's why education and advice are critical, because there will be pros and cons to any decision you make.In my case, I use a company to do my developing work and my buy and holds are in a family trust. This is the best mix of asset protection and tax advantages in my case.
Cheers,
Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
I also do all my development work in a company and buy and holds in a Trust.
Have a think about what you are planning to do long term. If you want to buy and hold several properties, then I think it is worth setting up a trust, not only for asset protection, but also for income splitting benefits.
If you are only ever going to buy one or two properties, then it is probably not worth the cost of having a trust ($1000 to set up then about $1000 pa to do the tax return).
But it is really a matter of what suits you individually. You should seek your own independent advice.
Cheers
K
C
SteveMcKnight wrote:companies don't get access to the CGT discount,
what if if you have the company as the trustee of a trust, would u get CGT discount then or am i totally off track here?
off tracl UME. it doesn't depend on who the trustee is, but to who the CGs are distributed to. I fyou distribute to an individual, then can claim the 50% discount. If to a company, then cannot.
Also if you are going to be using a company, you can have the shares owned by your discretionary trust.
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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