Hi Experts,
I am a newbie in this forum, me and my brother planning to do some property investment together.
I've been working for some time so my income is considerably higher compared to my brother who has just completed his uni. so my tax bracket at the higher end and my brother bracket is at the lowest end.
There is no problem getting loan either for myself or my brother.
Would it be better we do it all under my brother name, my name or joined considering I can get deduction but higher tax for the income or CGT, where by my brother has almost no tax deduction but would be lower on income tax or when we sell the IP.
Any comments would be much appreciated.
Thanks.
Think long term.
What will happen when you sell 5 to 10 years later with a $500,000 capital gain?
circumstances change, so best not to decide based on today's situation.
Look at using a discretionary trust for maximum flexibility.
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
Thanks Terryw for your reply. You're absolutely right, that things may changed in the future, and what ever I decided may not be suitable for the long run. I never heard about discretionary trust, what is this and how does this actually works ?.
Just out of curiosity, out of this two scenario which one is better, more tax deduction with higher CGT or less tax deduction and less CGT ? I don't have experience on this. anyone have the numbers to compare ?
Thanks.
I have a mate (just 1 tho) who was earning high income. His wife earn't nil. I advised him to purchase his investment using a discretionary trust. He wanted to claim negative gearing so he bought in his own name.
He sold the house 2 years later when it doubled in value. Made $200,000 CG. Unfortunately for him all this went on top of his income (or half of it after the 50% discount) so he paid a heap of tax while his wife still had a nil income.
He saved a few thousand while negative gearing but lost ten times that on paying extra tax.
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 guys,
My husband and I have been keen property investors since 2001. We knew that we were going to use property investing as a form of generating income and wanted asset protection against law suits for our rentals, so we were advised to set up a Discretionary trust, which we did in early 2004. It is, essentially, setting up a business status.
With it, however, comes all the increased costs of running a business. We pay standard accountancy fees to have our individual returns done, as well as accountancy fees for the company. These are about $3,500 for a standard year and much more if we have been actively buying, renovating and selling. Little things like, getting power activated on one of our houses varies by $150.00 between what is in our own name and what is in the company name. That goes for insurances, vehicle registrations and just about everything.
Last year, we were advised (and I have to agree) that we would have been better waiting until our profit margin increased before starting the structure, as the structure added so many unexpected costs.
Our cash flow had always been an issue with investing (though we have become very astute at spotting a really good deal and acting on it quickly) until now – I have started a very lucrative home business with fat profits fast within months. So, at last, this discretionary trust is beginning to really work for us. With the accumulated 'losses' held in the trust, we should not have to pay too much tax this year.
Weigh up your positives and negatives. Pay a few hundred dollars to speak to your accountant and get proper advice before you jump in, just because someone has advised you that there is better asset protection against law suits and bank troubles with your properties held in a trust structure.
Do your research and do what is right for your circumstances.Good luck
Belinda
http://www.striveandprosper.com
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