Hi,
I currently have 4 investment properties all of which are in my name which generate approx $250k gross rental income. I now have a family with my wife not working (twin 10 month old boys) who also owns outright a property that is generating approx $50k rental income.
I am looking at purchasing more investment properties and was hoping for some help on a trust structure allowing me to place the new properties in the name of the trust and have the ability to disperse the income if rented or profits (once renovated and flipped) to minimise my tax/CGT paid.
I have done some research on discretionary trusts and hoped someone could provide guidance with these or a advice on another structure.
I don't think I can transfer the current properties into the trust without paying stamp duty unless someone has some advice re this.
I know I have to pay taxes etc but want to minimise the amount paid if possible.
Any help would be great.
Thanks
Hi Brad
Congrats on your success thus far.
Unfortunately there are also land tax issues to consider in some states. Eg in NSW a disc trust has zero land tax threshold, whereas in Qld it is $350k (unimproved value, as per the rates notice).
If you are not buying in NSW then I am a huge fan of discretionary trusts for holding property. Flexiblity and asset protection are outstanding in this structure. NSW a unit trust can provide some flexibility and be transferred to super later in life.
You are right to want to pay the minimum tax, the Govt wastes so much of it I don't want to pay a cent more than I have to.
Where you are based is not as important as what state you intend to buy the property in.
D
RPI | Certus Legal Group / PRO Town Planners
http://www.certuslegal.com.au
Email Me | Phone MeProperty Lawyer & Town Planner
Thanks Darryl.
All my properties except one are in WA but I am always keen no invest wherever the potential is. The information re NSW is helpful and I definitely keep that in mind if investing there.
Do you know if there is any way to change ownership of my current properties into a DT without paying stamp duty ….. my death not being an option
Is it difficult to set up a DT and what are the ongoing associated costs?
Thanks
You would effectively have to sell your properties to a DT. CGT on the sale, stamp duty on the purchase.
We setup up DT's every day of the week. However they are easy to stuff up so you need to get it right.
Ongoing costs are $200ish per year in ASIC fees for the corp trustee otherwise it is only accounting fees.
Overall structure is vital.
regards
D
RPI | Certus Legal Group / PRO Town Planners
http://www.certuslegal.com.au
Email Me | Phone MeProperty Lawyer & Town Planner
I would generally recommend a fixed unit trust set up. This offers maximum flexibility which is not available to discreitonary trusts. This includes
1. Ability to transfer ownership to a SMSF without stamp duty (stamp duty in some states) and extract money out of super
2. Ability to sell units without changing title or stamp duty (some states)
3. Ability to transfer ownership in stages to reduce CGT
4. Refinancing principal – ability to borrow to pay for private expenses and indirectly claim the interest
5. Land tax threshold in some states – such as in NSW for certain trust set ups if the units are held by an individual.
The units can be held by a discretionary trust for all of the above benefits (except 5) and this will give the same asset protection and tax felxibility as a 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
Thanks Terry.
Point 2 – Ability to sell units without changing title or stamp duty ….
Would this allow me to transfer them out of my sole name into a unit trust without paying stamp duty (3 properties re in WA and 1 in Vic).
If so would this then allow me to disperse the income to others within the trust?
i have sent you an email so will more than likely discuss this further soon.
Thanks
Brad,
If the properties are in your name at the moment then there would be no units to transfer – I am referring here to units in a unit trust, not apartments.
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
You must be logged in to reply to this topic. If you don't have an account, you can register here.
