Forum Replies Created
Richard,
Thanks for the e-mail.
The deed of our SMSF says that the trustee can invest in "financial products including installment warrants, options, futures..etc…" which I think provides the fundation to invest in Bare Trust Warrants without the necessity to change the trust deed.
In regards with the non-recurse loan,I have the following general questions:
· Some lenders DO NOT request personal guarantees as a trustee for the SMSF HOWEVER, they ask personal guarantees in the client personal capacity which I think contravene the legislation. Is this right?
· Once the loan is repaid, and the property is transferred into the super fund, does this will crystallise a Capital Gains issues and also Stamp Duty issue? I know the Federal Government has confirmed Capital Gains will not apply but States haven’t ruled on stamp duty. What will be the strategy to avoid this situation?
· Once the property is transferred into the SUPER fund, will this contravene the contribution limits (I think if bigger than 450K) so tax rate will be 46.5% rather than 15%? If so, what will be the strategy to avoid this situation?I have so many questions but if you could give me some lights on these ones, i would really appreciate it.
Eleven
Interesting topic as we are exactly in the same situation.
We use to have our Super in AXA. Back in November we created our SMSF and moved all the cash to the new Super Fund. Timing was very lucky as after that the market went down the hill.
Now we have the cash and we are shoping around for a NON RECOURSE loan to laverage a residential property.If anyone could recomend a good broker it would be appreciated.
Cheers
Eleven6
Dear Megan and Simon,
Thanks very much for the references.
Best regards,Eleven
Dear CATA and GP,
Thanks very much for your e-mails. I think is good to discuss these issues in the forum as I am pretty sure more than one will pick up some knowledge as I am doing.Cata re your question I guess the idea would be to create a balanced portfolio of properties in the Trustee and do some sort of cross guarantee to minimise the risk. To be honest I have not investigate that issue as I am doing my first steps on this business.
GP your comment make me think and laugh at the same time!! I guess the best way to minimize the risk is to do a pre-nuptial agreement before the wedding! ha.
Suppose the HDT and the Trustee are ready to go. How would be the best strategy to negotiate with the finance companies, as they most likely will look some sort of security on the loan?
From your experience is it likely to loan the money to the HDT or they will prefer to do it to me directly? I have so many questions!!
If anyone could give me some lights on this would be great as I have a meeting with the Mortgage Broker this Thursday.
Best regards,
[rambo2]Eleven
Dear Cata and GP,
In my previous e-mail I should say HDT (Hybrid Discretionary Trust) rather than DT only. Apologies for the confusion. as I am new with all this jargon.[blush2]
Having corrected that, I would like to rephrase the whole thin:
Scenario One:
Goals
1-To move some properties into Superannuation Funds in the short term.
2-Flexibility to minimise tax.
3-Asset protection.Under this scenario, the structure would be a Unit Trust that will issue all its units to a HDT
a-When the IP are profitable, the HDT will NOT issue any units so it will behave as a DT. This will allow to minimise the income tax by redirecting the income into the beneficiary with the lowest tax bracket. Under this scenario, the asset is 100% protected.
b-When IP is negative geared, the HDT will issue units that I will buy as an investment and will allow me to use the losses generated by the HDT.
In this scenario the asset will NOT be 100% protected as the units will be issue by the HDT however the losses would be used to minimise Income tax rather than accumulate them until the IP become positive again.c-If the IP is owned by a UT and all the units are issued to the HDT this can be transferred to a Super Fund with minimal Stamp Duty Tax payment
Scenario Two
Similar to scenario ONE BUT properties will not be moved to a super fund in the short term.As goal number one is not applicable any longer, a HDT will be enough to handle the IPs when it is profitable or negative geared. (Please refer to abovementioned points “a” and “b”).
In my particular situation I am not looking to move any property into my Superfund in the near future therefore, i will go for scenario 2 ie. a HDT with a corporate trustee being the director and shareholder the one with less risk to be sue in the future.
I hope this clarify my previous e-mail and help other members of this forum.
I am not an expert on this issues therefore I would recommend to seek advise and ask many many questions.
best regards,
Eleven.[cap]
In both scenaqrios the Trustee of the HDT will be a PTY LTD with one shareholder and director that hold a reduced risk to be sued.
Dear CATA and GP, thanks for your e-mails! Much appreciated!
Today I went to see my accountant with the following outcome:1-The UT is required if I have the intention to move IP to my Super Fund. As GP said there are rules to comply like it is not permitted to mortgage the property.
2-Discretionary Trust (DT) will allow me to distribute the income among other beneficiaries with lower tax bracket.
3-It would be better to have a Pty Ltd as a trustee of the DT so in the worst scenario the tax bracket would be 30%.And franked dividends could be distributed to shareholders.
He assured me that I would be able to accomplish my goals, which are (in order of importance for me):
a-Tax Minimisation
b-Asset protection in case somebody sue me.
c-Flexibility in case the IP become negative geared.Re the cost, he quoted $600 for the trust and $1200 for the Pty Ltd. both prices include Order Dee and Tax Registration.
Best regards,Eleven
Thanks very much GP.
I beleive that if the HDT issues units, that will allow me to buy them and hence move the money sourced from the loan into the HDT, then the HDT could buy units into the UT and finally buy the property under the UT name instead of mine.
Make sense? Also, I think that if I am buying units from the HDT, that will allow me to deduct the interest from my personal income tax.
Tomorrow I have the apointment with my accountant so I will let you know the outcome.
Best regards,Eleven
Dear All,
I said on the 7/6/05 that I will be back…so I am with more questions.The last few weeks have been very interesting, as I have been gaining lots of knowledge.
My outcome is a follows:
For my specific circumstances i.e.:
-Married, 2 children 16 and 8,higher bracket taxpayerAnd my goal in this venture:
-To have 10 positive cash flow IP in the next 3 years.I beleive the best way to go is:
1-To set up a Unit Trust (UT)
2-To set up a Discretionary Hybrid Trust (DHT)
3-All the units from the UT are held in the DHT hence the HDT is acting as a Trustee of the UT.
4-The units from the DHT are distributed between my family members.
5-Set up a PTY LTD company that will act as a Trustee of the HDT.
5-The Pty Ltd Company will have 1 Director (me) and 1 Shareholder (me).
6-The Pty Ltd has to be in existence before the UT and the HDT are settled.This scheme will give me the following advantages:
a-In case the positive cash flow IP became negative cash flow IP, I would be able to use the negative gearing in my favour as a higher income tax bracket.
B-Non-deductible debts could become deductible.
c-Ability to transfer IP to another trust without paying Stamp Duty.
d-Ability to move the IP into my Super Fund trust if necessary without any problem.
e-ability to protect assets out of the trusts.
f-ability to loan money for the IP and deduct the interest in my personal income tax return.Please let me know if these make sense.
Best regardsEleven
Dear Steve,
I would classify the user of this site as follow:
Group1- Users doing the first steps.
Group2- Users that got 1 or more investments.
For Group One, it would be nice to have:
-Access to advise on how to set up the best structure to start investing.
As there is professional liability involved in this suggestion, maybe the case to have links to specific consultant that we can contact. I would not recommend your company to do it directly as will require to much resources.
It could be the case to have one or two options for each state.
This recommendation could benefit the user by having the information with a reasonable fee and your company by having some sort of joint venture and get some commission for the deal done trough this site.
-I would recommend the same with the finance issue.
Nevertheless there are plenty of brokers in the market; it would be nice to have two options recommended in each state to choose from.
-Some links recommending conveyancers and lawyers in each state would be great starting point.For group two, I believe this group is the one that is looking for investment opportunities.
-A fortnightly letter highlighting areas around Australia with investment potential would be great.
This suggestion will reduce the research time involve for each of the users. We need to remember that the majority of the users are working full time and time is a strong limitation.
I believe people would be happy to pay a reasonable price for the letter as will help user to identify opportunities for investment a bit quicker.By providing these types of “services”, the user will find the road a bit even and your company will get opportunity to generate income by helping the users to start/keep investing.
Best regards’Eleven
Dear Terryw and Cata,
I read the TA and seems to me that ATO does not like the hybrid trust? If this is the case, what type of Trust would be better to start investing on properties?
Best regards,
ElevenDear Terryw and Cata,
Thanks very much for the response. Actually thanks to all. I am pretty much impressed with the quality of knowledge in the forum.
I will study your answers and must probably come back with more questions.
Best regards,Eleven
Dear Terryw and Cata,
Thanks very much for the response. Actually thanks to all. I am pretty much impressed with the quality of knowledge in the forum.
I will study your answers and must probably come back with more questions.
Best regards,Eleven
Hello All,
This is my first mail as I just joined the site.
I guess I am in the same situation than Nahna, preparing the fundamentals to start making real money.
From the e-mails plus other sources I guess the follwoing:
1-Set up a Family Trust
2-Do not specified the beneficiaries on it.
3-Set up a Trustee Company P/L that will administered the assest of the Family Trust.
4-I guess the shareholders and directors in this Trustee could be me and my partner.
5-Buy the properties using the Trustee Company P/L
6-Loan with the bank can be done under my name so I can deduct the intererest (I amnot sure about this)
7-Income goes into the Trustee and is distributed between the beneficiaries to minimise Tax payments.Can anyone help me to see if this broad strategy is achievable?
Also, I understant that the strategy will be different for each individual as everyone of us have different circumstances however, It would be nice if we can receive some examples to clarify the issue.
Best regards,
Eleven
