Forum Replies Created
Hi Milty, thanks for the tip re http://www.tridentpress.com.au. Has anyone read something of this guy Spicer? He offers far too many books. I’d be interested in feedback of our gurus here. Since almost everything about topics like “Derivatives” and “Asset backed securitisation” fits in one book I believe Spinner is just flooding us with details. Any readers out there?
Cheers-AJ
I am looking at China. What are your plans?
[buz2]Just out of interest. Are you a fulltime investor or do you work as well. I’m just wondering how you can have found a remote place like this and spend so much time researching everything locally.
Thanks.
JGHi Lucifer_au, thanks for yur comments. I’m not sure if the property market isn’t efficient. Just look at Dubai’s market which has soared in the last 24 months with house prices doubling just because international investors have realised that the rental yield is above 10%-12%. Now house prices have quickly gone up so far that yields are starting to be in line with a more mature market such as Australia where yields are sadly around 5%. Steve’s whole book and CF+ is based on one assumption: rental yields are above 10%. If they are in general, anyone with half a brain can create CF+. If yields go below it will not work.
Sure, I take you point and the one of all the other CF+ advocates around here. “It’s just harder to find CF+ properties” but then it’s NOT possible to find these opportunities WHILE you are still working fulltime. Thus the praised Financial Independance is not possible with the CF+ strategy.
Please, dear CF+ property investors tell me your experiences, prove me wrong and let me know if I’m wrong or too pessimistic.
Regards,
JGOriginally posted by Terryw:Some tough questions there!
1) It is very easy to change trustee’s if your trust deed allows it. but this could have major implications such as
a) changes to the loans (loans are in trustee’s name)
b) could result in stamp duty payable again in certain circumstances (see http://www.cleardocs.com and your state revence office website)
c) if the ATO considers it changes the beneficiares then they may class it as a resettlement of the trust and hence CGT and stamp duty may be payable on assets.2) property owned by a trust is not your asset, so if you are sued personally it MAY be safe. If a company is sued, the liabitity is often restricted to the company and not the directors/shareholders unless they have done something wrong.
3) Anyone receiving a distribution froma trust must pay tax on that money at their relevent tax rate. ie it is added to their other income. if they do not have other income, then the first $6000 is tax free.
Distributions from a company are a bit different. usually the company has paid tax on its profit, so you are not charged tax again on this income, unless you have a tax rate more than the company rate of 30%, when you would pay the difference as extra tax. If your inocme in lower, then you may actually get some tax back.
4) I think a trust is way more flexible as it allows the income to be distributed to the lowest tax payers first (amoung a large range of beneficiaries). Company profit must be distributed to the shareholders in accordance with the shareholding percentages. Athough you could just pay money to basically anyone as some sort of fee as well.
5) It is very easy to borrow using a trust. the trustee must guarrantee the loan, and the loan is assessed on the trust income and/or the trustees income. The trust deed must be supplied to the lender who will have their ‘legal’ people review it (and may charge a extra fee of $100 or so). If a company is trustee or if just borrowing in a company name, then the directors must give personal guarrantees and loans will be assess on their own personal income etc.
Some lenders are no insisting on taking a fixed and floating charge over companies as well. This is like a mortgage over teh company assets. This is a pain in the arse as it causes problems when going to different lenders for subsequent loans.
Lenders may also insist on the trustees/directors in getting independent legal advice so they fully understand what they are getting themselves into. So extra legal fees may be charged by your solicitor for the explaination of this – $100 approx.
If you are planning on buying many properties, it is wise to consider having just one trustee/director. Many banks have maximum exposure levels per client (especially for low docs) and if a husband/wife go in as joint trustees, the limit is half of what it would be if they went in with one trust each.
6) Companies are more comlpex to operate. There are many rules relating to companies with extra reporting requirements (and costs) related to ASIC.
7) I don’t know about investing overseas, but would imagine you would need a company or trust registered in the country you are investing in.
The ATO will also want to tax you on your world wide income.
ps. I am not an accountant, so don’t rely on anything i have written.
Terryw
Discover Home Loans
North Sydney
[email protected]So what exactly, appart from asset protection which is only relevant for business owners, is the advantage of investing via a trust instead of investing personally???
Originally posted by Terryw:Some tough questions there!
1) It is very easy to change trustee’s if your trust deed allows it. but this could have major implications such as
a) changes to the loans (loans are in trustee’s name)
b) could result in stamp duty payable again in certain circumstances (see http://www.cleardocs.com and your state revence office website)
c) if the ATO considers it changes the beneficiares then they may class it as a resettlement of the trust and hence CGT and stamp duty may be payable on assets.2) property owned by a trust is not your asset, so if you are sued personally it MAY be safe. If a company is sued, the liabitity is often restricted to the company and not the directors/shareholders unless they have done something wrong.
3) Anyone receiving a distribution froma trust must pay tax on that money at their relevent tax rate. ie it is added to their other income. if they do not have other income, then the first $6000 is tax free.
Distributions from a company are a bit different. usually the company has paid tax on its profit, so you are not charged tax again on this income, unless you have a tax rate more than the company rate of 30%, when you would pay the difference as extra tax. If your inocme in lower, then you may actually get some tax back.
4) I think a trust is way more flexible as it allows the income to be distributed to the lowest tax payers first (amoung a large range of beneficiaries). Company profit must be distributed to the shareholders in accordance with the shareholding percentages. Athough you could just pay money to basically anyone as some sort of fee as well.
5) It is very easy to borrow using a trust. the trustee must guarrantee the loan, and the loan is assessed on the trust income and/or the trustees income. The trust deed must be supplied to the lender who will have their ‘legal’ people review it (and may charge a extra fee of $100 or so). If a company is trustee or if just borrowing in a company name, then the directors must give personal guarrantees and loans will be assess on their own personal income etc.
Some lenders are no insisting on taking a fixed and floating charge over companies as well. This is like a mortgage over teh company assets. This is a pain in the arse as it causes problems when going to different lenders for subsequent loans.
Lenders may also insist on the trustees/directors in getting independent legal advice so they fully understand what they are getting themselves into. So extra legal fees may be charged by your solicitor for the explaination of this – $100 approx.
If you are planning on buying many properties, it is wise to consider having just one trustee/director. Many banks have maximum exposure levels per client (especially for low docs) and if a husband/wife go in as joint trustees, the limit is half of what it would be if they went in with one trust each.
6) Companies are more comlpex to operate. There are many rules relating to companies with extra reporting requirements (and costs) related to ASIC.
7) I don’t know about investing overseas, but would imagine you would need a company or trust registered in the country you are investing in.
The ATO will also want to tax you on your world wide income.
ps. I am not an accountant, so don’t rely on anything i have written.
Terryw
Discover Home Loans
North Sydney
[email protected]
