Hi, am new to this forum, but not new to property investing. What I am new to is trusts. This year, I started a family trust (discretionary trust). My self-employment income goes in here. At the moment, I only have one property.
I’m confused about how people buy property through trusts. I can find information about the option of doing this online but nothing about how it actually works. My understanding of a family trust is that you give the money out family members before the end of the financial year (and they all need to pay tax what you give them, unless their total income is too low), and that is all you can do with it.
So, how do you go about buying property with a trust? I’d appreciate any insight.
A trust is not a legal person so it cannot enter into a contract. It is the trustee that enters into the contract and goes on title and gets the loan. Same as buying property normally really. The trust should pay hte deposit out if its funds (trustee holds these funds as trustee separately from their own personal funds).
A trust distributes income otherwise it is taxed at the top marginal rate. Income can only go to beneficiaries who are the ones that pay tax on it. The trust income is added to their other income.
Seek legal advice before buying property.
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!
I’m still not understanding how money can come out of the trust to pay a deposit on a loan.
My understanding is that the money in the trust had to come out and into personal bank accounts, which is then paid tax on (as you said in your last sentence). But I’m still not getting how a deposit can be paid directly from the trust.The trust bank account can transfer the deposit directly to the agents trust account for the purchase.
Money from the trust should not touch your personal bank account for a variety of reasons – but if it did that doesn’t mean it is income and tax is payable on it.
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 again!
I think I need some in-depth step-by-step info. I’m obviously missing some steps here, which is why I’m not getting my head around it. I’ll try to find some comprehensive information online so I don’t drive you crazy with questions!
Just think of the trust as a separate person – John
John is buying a property so john would pay a deposit. There is no need for john to give you the money for you to pay the deposit, he should pay his own deposit.if you pay the deposit for John you are weakening asset protection. if the deposit is to come from you you would gift it or loan it to john so that he could pay the deposit.
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 again!
I think I need some in-depth step-by-step info. I’m obviously missing some steps here, which is why I’m not getting my head around it. I’ll try to find some comprehensive information online so I don’t drive you crazy with questions!Online research is a great thing but sometimes speaking to a pro 1-on-1 is easier and faster. I’m sure in one meeting with Terry you’ll get specific and relevant information that may be extremely valuable to you 👍😎
Ethan Timor | Aligned Finance Pty Ltd
http://www.alignedfinance.com.au/
Email Me | Phone MeActive Investor & Broker; Based in Northern NSW, servicing Australia wide; Author of '34 Proven Ways to Maximise Your Borrowing Power' (download free from our website)
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