Trust structure vs Company

If you aren't sure about how to structure your investments, the 'and/or nominee(s)' clauses could be useful, but make sure you double check this with a qualified professional in your state, so that you don't pay double stamp duty.

Different structures have different benefits and drawbacks, and it all depends on how much asset protection and flexibility you want in relation to the cost.

However having said that, I believe holding appreciating assets in a discretionary trust with corporate trustee is much wiser than holding it in a company structure, as you are able to distribute income and also access the 50% capital gains tax discount.

I'm buying a property that requires a commercial loan (6 units on 1 title).  Getting finance has been like drawing teeth-  it has literally been a 5 month process. 

With settlement due at the end of this week, the lender has just told me that they now also require the loan to be within a discretionary trust with a company as trustee.

I'm trying to determine if this is a deal breaker for a couple of mum/dad investors with one other IP. 

TerryW's 4th point in last post (above);
4. Consider using a discretionary trust with a company as trustee. This will limit the liability if the trust is sued and also offers the greatest flexibility with minimsing tax

My questions are;
1. Is this as flexible as buying within a discretionary trust with me and my wfie as trustees?
2. Will this structure be like buying within a company (ie. taxed at a flat rate of 30%, and no 50% CGT discount).

Any advice here would be welcomed.

Thanks Terry, appreciate the rapid response. 

Would you expect the bank to do anything differently in assessing the viability of my loan going forward.  Are they going to want to see Company Profit & Loss each year, for example?  To assess the ability for the company to service loan?

(Or is it like an investment loan for a residential rental property- where they only care once you start defaulting on payments)

There are many a Commercial loan done these days ( especially if with 1 of the Big 4) which depending on how structured have an ongoing requirement for you to provide income information on the anniversary of the settlement.

Standard Term loan would be different but depends on how it is structured.

5 months for a loan is incredible but as Terry has mentioned "what right has your Bank to tell you what name / structure to buy the property in.

Cheers

Yours in Finance

Hi

Why the lender would try to give you this advise is extremely concerning. Are they qualified to give such "advice" I doubt it.

Were you originally looking to purchase in your own names or perhaps via a SMSF? I'm confussed.

Yeah, getting finance has been sooo unbelievably difficult and convoluted.  I wont name the bank, but it's a bank in the west.

After running the serviceability calulator umpteen times since initial application in July/Aug, they finally agreed that my wife and I could service the loan. 

What that sorted, the application proceeded to the lending department, who imediately came back and said, 'er, actually, we cant accept any of this unless it is within a discretionary trust with a company as trustee.

With such a gruelling lead up to this in proving serviceability, we were flabbergasted.  .

This was the only lender that would accept the investment and my security so (for the purpose of this deal) we have setup a discretionary trust with a company as trustee.

Fingers crossed, we'll achieve settlement in 6 weeks from now.

Terry be suprised how many lenders are also adopting the same attitude to Trusts as BW.

Same old story if you dont understand or indeed if it only forms a small portion of your business and you dont want to understand then easier to same NO.

Cheers

Yours in Finance