All Topics / Help Needed! / structuring assets

Viewing 20 posts - 1 through 20 (of 23 total)
  • Profile photo of DaveDave
    Participant
    @dave87
    Join Date: 2014
    Post Count: 4

    hi guys
    i am new here and was wondering if you could help me?!?
    i am debt free have some money in my account and i am pretty keen to buy an investment property.
    But before i rush into something i would like to know a little bit more about structuring my investment.
    For example i am not sure in which name i should buy property?? in my name, in the name of a company ,as a trustee
    in behalf of a trust or do i have any other oportunities??Does anyone have some advice or know some good books i could
    read to get some more information??Thanks in advance

    Dave

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Have a look at my first few newsletters, I have covered ownership and other structures.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of DaveDave
    Participant
    @dave87
    Join Date: 2014
    Post Count: 4

    hi terry
    thanks for the quick response.i tried to have a look at you newsletter but i cant find anything.
    i typed structure and ownership in the search field but it doesnt come up with anything what am i doing wrong??

    dave

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Sorry Dave, I didn’t realise that I haven’t got a link to them on my personal site. But they are here on my finance company site:
    http://www.loan-experts.com.au/article/

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of DaveDave
    Participant
    @dave87
    Join Date: 2014
    Post Count: 4

    thanks for the link terry

    Profile photo of BuyersAgentBuyersAgent
    Participant
    @knightm
    Join Date: 2005
    Post Count: 338

    Dave, sent you response to pm as well.

    BuyersAgent | Precium
    http://www.precium.com.au
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    South Coast NSW Independent Buyers Agent - Wollongong to Batemans Bay and Regional NSW. DOWNLOAD OUR FREE 14 POINT PROPERTY BUYER'S CHEATSHEET to avoid painful mistakes at precium.com.au

    Profile photo of PHPPHP
    Participant
    @php
    Join Date: 2014
    Post Count: 111

    Hey Dave,

    Terry’s article will answer your questions. If you have anymore questions, don’t hesitate to post it here.

    Cheers!

    PHP | Mortgage Station Pty Ltd
    http://www.mortgagestation.com.au
    Email Me | Phone Me

    Give us a call or send us an email for a free residex report.

    Profile photo of DaveDave
    Participant
    @dave87
    Join Date: 2014
    Post Count: 4

    hey guys
    i read terry’s newsletter and its really informative, unfortunatly it doesnt answer all my questions!
    As i wrote earlier im debt free and would like to build a proper finacial structure before i start buying
    properties.Here are my thoughts im pretty sure i do not want to buy in my own name or together with my girlfriend.
    Which leaves me with buying in a companies name or in a trust.

    in case i buy as company:
    i would be the director and my company would have a separate deductible income.
    Which would be good because i would start with 0$ and would not add it to my normal income.is that right??
    And does my borrowing capacity change when i set up a company?i read that i(director) could act as an
    guarantor and use my income multiple times to borrow more money?is that right??

    in case i buy as company in behalf of the trust:
    i cant really get my head around this scenario.Could i set up a company, be the director of the company
    and the funder of the trust at the same time??If i buy in behalf of trust the main reason to do that would be,
    to minimize my tax and distribute my income.is that right??So in my case there is now one to distribute to
    unless i could put it into my super.could i??

    i am really struggling to get this information sorted, and should probably see a professional about that,
    but before i do i would like to get a better understanding about my the things i can do.
    Every post is highly appreciated.
    Thank you guys in advance

    dave

    Profile photo of PHPPHP
    Participant
    @php
    Join Date: 2014
    Post Count: 111

    Hi Dave,

    People here will be needing more information from you to be able to help you further.
    What is your current financial situation?
    Why are you sure that you don’t want to buy in your own name for starters? What made you decide to rule this option out?
    Do you know that costs involve in setting up trusts? Also the ongoing costs for this?
    This could costs hundreds of dollars at the beginning of your journey which may or may not impact you. Also, if not done correctly at the start, if will also cost you heaps more to rectify things later on.
    Unless you have sat down with your accountant and finance person regarding your own individual situation, do not close the rest of the options in buying properties and be fixated to one form of buying.
    I know some people who uses their own name, their partner’s name, and trust accounts depending on each circumstances.

    By the sound of things, it seems like you have just finished reading one of Steve’s books and decided to follow his path. Which could very much work well for you, but each person’s financial situation is different.

    PHP | Mortgage Station Pty Ltd
    http://www.mortgagestation.com.au
    Email Me | Phone Me

    Give us a call or send us an email for a free residex report.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Dave

    Thanks for the comments about the newsletter, I was planning to cover trusts and companies in future editions.

    A company is a separate legal person and has its own tax return done each year and pays tax. Any directors would need to give personal guarantees and this counts, from a servicing point of view, as if you took the loan in your own name. So a commpnay would effect you servicing just as buying in your own name would. A company pays a flat 30% tax so if your personal taxable income is such that you would pay more than 30% tax on any income from the company (wages, dividends etc) then you may leave the money in the company and cap the tax at 30%. You can then get it out at a later date when your income is lower.

    A trust is not a separate legal person and is not an entity, but a relationship between the trustee and the beneficiaries. A company would buy property in its capacity as trustee. A trust will have its own tax return but generally does not retain any income and won’t be taxed. All income will flow out to the beneficiaries – which might be you and you might pay more tax. Or it may be distributed to a comapny and capped at 30%.

    generally a company is not recommended to hold appreciated assets as the CGT will be 30% whereas if you had a trust or your own name it could be a max of 45% x 50% + medicare.

    But there are many things to consider when structuring, a major one being land tax.

    See my book for some information on trusts. link is in my 3rd newsletter (free download).

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of blackhotelblackhotel
    Participant
    @blackhotel
    Join Date: 2010
    Post Count: 140

    If I had my time again I wouldn’t of made all the mistakes of listening to my accountant 20 years ago.

    DON”T put into a Company name. You do not get 50% CGT deduction. A real killer when u want to sell a property 20 years later and you have a profit of say $1,000,000 (this can happen if u invest in property long term). Guess what —- you pay tax on $1,000,000 (do your own maths) instead of paying tax on $500,000 (if in your own name or Trust).

    Putting in in a trust – OMG LAND TAX is a killer tax. You pay this every damn year and you don’t get the threshold. For example – just one property of mine I pay $2,900 per year. 10 yrs = $29,000. Do the maths over 20 yrs.

    Because of this I now prefer purchasing properties in my own name in different States—- just saying!

    Talk to good property expert like the ones on this site.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    blackhotel

    Your post is only partially true.

    Company can work in many instances. A company gets its own land tax threshold in NSW and many states so this can save land tax. No 50% discount may not be an issue as company tax is 30% and CGT a max of 24% so just a 6% difference. But a company can retain income and pass it out as dividends in future when the shareholders have lower taxable income with franking credits. Also some instances there is no CGT, just income – such as developers.

    For the land tax you must be referring to land in NSW? If QLD a trust does get its own threshold so a trust can save land tax there. Also in NSW if a person has used up their tax free threshold anyway then land tax will be payable at the same rate if the land is owned personally or in a trust.

    I just advised a client tonight whose accountant got the NSW land tax wrong and she is up for about $3000 pa when he told her she would have none. Its complicated.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of blackhotelblackhotel
    Participant
    @blackhotel
    Join Date: 2010
    Post Count: 140

    Thanks Terryw
    Just to clarify as I like to read things in simple terminology, I don’t get what you mean by ‘may not be an issue as company tax is 30% and CGT a max of 24% so just a 6% difference’.

    I’m trying to get my head around the meaning of the statement.

    Simple terminology is – If I have a profit of $1,000,000, GCT would be $300,000. Are you stating that CGT has a max of 24% meaning tax of $240,000. If so you just saved me $60K.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    per wording. I should have said may not be such an issue.

    top tax rate is currently 45% but if asset held for 12 months a 50% discount – 22.5 plus medicare which could be 2% = 24.5%
    https://www.ato.gov.au/individuals/income-and-deductions/how-much-income-tax-you-pay/individual-income-tax-rates/

    If a company owned the tax rate is 30% so 5.5% more, but the land tax savings could have made up for this…and company can retain income and distribute to you later (if u are shareholder) and you may get back some of the tax paid in the form of franking credits.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Wiwin
    Participant
    @wiwin
    Join Date: 2011
    Post Count: 30

    Hi Terry,

    I am reading your book up to p.66 now. I am reading so slow since i had to keep flipping back the pages. It’s really complicated and confusing.

    I always thought that trust structure will give you more benefit about land tax saving, asset protection, and borrowing power.
    However now I think buying under my own name will give me advantage over land tax saving. I could avoid the land tax charges by diversify my portfolio and spread it over the states, I don’t expect to have hundreds of ip anyway.

    About Asset protection and borrowing power – as long as i buy building insurance and landlord insurance for my asset, buying positive gearing property to ensure cash flow – isn’t it the same ?

    Thanks a lot.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    thanks for the feedback. I tried to make it easy to understand. Wait till you read my trust book and asset protection book, I am making these complicated.

    Trusts do give land tax advantages, asset protection but not generally borrowing power advantages (indirectly they can).

    Asset protection – what are you trying to protect from? If it is creditors then insurance won’t help you for court judgments from breaches of contract, defamation etc. But insurance will help if a tenant is injured on a property you own – in most cases, not all. Not the same at all.

    Not sure what you mean about posoitive gearing as this wouldn’t change anything.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of CatalystCatalyst
    Participant
    @catalyst
    Join Date: 2008
    Post Count: 1,404

    Terry what is your book called? Where do you get it?
    Thanks

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    You can get my latest newsletter here
    http://www.loan-experts.com.au/article/ which has a link

    or via my tax company, the book “Tax and Trusts for Property Investors” can be downloaded here:

    http://www.propertytaxsolutions.com.au/

    • This reply was modified 10 years ago by Profile photo of Terryw Terryw.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Wiwin
    Participant
    @wiwin
    Join Date: 2011
    Post Count: 30

    Thanks Terry, its complicated because i don’t really understand trust structure.
    The book itself is easy to understand, i read fast once i passed that trust part.

    Actually i don’t understand trust benefit for asset protection, protect the asset from what ? Is it for business people who own business and might going bankrupt so they will hold all asset under trust to avoid the lender and court order to pursue their asset ? so if we are on PAYG and single , actually we don’t need trust.
    Am i correct ?

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Asset protection is usually associated with protection from potential future creditors. An interest in a discretionary trust is not something that amounts to property so if a beneficiary went bankrupt the creditors won’t generally get access to the property of the trust. Business people are at a significant risk of potential bankruptcy, but non business people can and do go bankrupt too. I have seen a few go down – due to credit cards, court cases about defective cars that they lost, contractual disputes, loan defaults etc.

    Also consider asset protection in death. Trust assets do not form part of the estate on death, so don’t pass via a will. If a will is invalid or challenged then generally trust assets are safe (except in NSW potentially).

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

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