[][]Bad new all round guys….no tax relief for adoption (at least none that I know). Trust me if there was I have a teenager going cheap.

CGT relief in Trusts – to answer Michael’s question. In a trust you can still access the 12 month 50% reduction in CGT, in a company you can’t.

Example…buy for $100,000 hold for 12months and 1 day, sell for $200,000.

In a trust you’d be paying tax on (200,000 – 100,000) = 100,000 x 50% = $50,000.

In a company you’d be paying tax on (200,000-100,000) = 100,000.

Admitedly in a company your rate of tax is fixed at 30%. Any tax you pay in the company’s profits you can take out in the following year as a fully franked dividend…..and this is getting way too technical….

Does this help.[?][?]

Sorry been doing someone’s tax returns – yipee.

If you own the property and then basically rent it back to yourself I can see you having problems with the ATO.

Years ago you could buy your PPR in a company or trust structure and then rent it back yourself, but the ATO have cracked down on that. I would imagine that you’d have the same problem trying to rent the property back yourself as an office. You would still be connected to the property via the Trust/Company.

I’m open for correction on this issue if there is another “beancounter” out there.

So your structure is Company as corporate trustee for the Family trust.

Or

Michael Family Trust trading as ABC PTY Ltd

Have you already set this structure up. I’m in QLD so maybe things are different up here….just about everything is “different” up here.

This isn’t answering your question, however, most of my clients are structured like this.

Company as corporate trustee for a Discretionary Trust and a Unit Trust. The Discretionary Trust owns the units in the Unit Trust. The Company never buys/sells/trades at all, it is only a trustee. Properties (shares whatever) are purchased in the Unit Trust. Profits from the unit trust are distributed to the discretionary trust which is turn distributes the profits out to beneficiaries.

Can you clarify your initial question a bit.

Thats something you’d have to check with your local authorities I would imagine. When you say company trust….what exactly do you mean as a company is one thing and a trust is another.

Little Bee if you are renting both of these properties out then the cost of a Quantity Surveyors Report (Tax Depreciation Schedule) is deductible against the income being earnt.

Check that the company/professional you are using for these schedules is up to date with changes in the tax law. There was an Administrative Appeals case handed down by the ATO Admin Appeal Court this year which effectively disallows a lot of items as depreciable. I think the plaintiff in the case was named McCormack. A lot of QS (quantity surveyors) are still including items on their schedules that are disallowed by this case.

I haven’t heard of anyone challenging the case yet either.

Kristine sorry to take so long to get back to you. Yes your accountant is correct. If you are a director of a company then your personal assets as a director of that company are up for grabs. Just ask the HIH guys!!!

You can protect your PPR with debt however.

Regards trusts and companies. Yes there are set up costs. A company will cost you upwards of $1200 to set up and then the ongoing cost of ASIC fees (annual) of say $350 (ball park figure). A trust (either discretionary or unit) will cost you upwards of $550.00 plus ongoing costs of having the tax return for the trust prepared each year.

If you are structured with a Company as the corporate trustee for a discretionary trust and then you set up a unit trust to purchase your property in (the discretionary trust holds the units in the unit trust), the Company acts as a trustee ONLY and never trades. Each year the Company would lodge its ASIC return and a nil tax return. The discretionary trust would receive any income that the unit trust earns (by this I mean profit). You would have a tax return for the unit trust, a tax return for the discretionary trust and then tax returns for the beneficiaries of the discretionary trust.

Get hold of a copy of a CPA (Certified Practicing Accountants) monthly magazine (possibly from a library) and have a look at the advertisements in the back for buying companies and trusts. Bear in mind that this buys you a shelf company and a trust deed. You or your accountant will then have to apply for a Tax File Number (TFN) for each entity. It gets complicated but it will protect your assets.

Cleary and Hoare are in Brisbane but I believe they travel to Melbourne and you can subscribe for a “free” newsletter from them over the internet….don’t know the www address but you could call them. And no I don’t work for them, but I have been to their seminars on asset protection and these guys know their stuff.

Hope this sheds some light on things for you and doesn’t leave you too confused.[:X][:X]

rx2_73, some accountants will hard sell the whole Trust scenario based on the “if” factor. IF you have an “uninvited guest” on your rental property and they fall off the balcony and break their necks – sue you for damages – you won’t be covered under your insurance….apparently “uninvited guests” aren’t covered under insurance. IF your property is under insured and you have a fire and the fire damages adjoining properties you can be up for the under insured portion to the other property owners. The example I’ve heard given is as follows:

Jonny Average ownes a business and suffers a fire which virtually destroys his business and does damage to the adjoining businesses. The insurance assessor talks to Jonny Average and his bevy of employees and comes to the inclusion that Jonny is only insured to 4/5ths of the value of the business assets. Poor old Jonny has to foot the other 1/5th for his own damage and then 1/5th of the adjoining businesses damage…potential leaving Jonny with a big fat debt.

The “uninvited guest” and the “under insured” scenarios are the ones I hear used most often. Litigation statistics for the USA are often bandied around with the addition that Australian Courts are heading the in the same direction as the USA. The argument being that you should not own anything in your own name but rather in Trust structures – not for any possible taxation benefits but to protect your assets.

It comes down to how risk adverse you are and how likely you think it is that any of the aforementioned scenarios could/would happen to you.

It’s my understanding that the reason you’d spread your loans between different banks is so that whenever you go asking for another loan the bank doesn’t have to revalue your entire portfolio of properties.

I may be entirely mistaken here, but it’s something I was told by a “property investing accountant” on the Sunshine Coast.

I wish I was pocketing $75 an hour. I’m an accountant doing tax and asset protection. My charge out rate is $120 per hour but I don’t see that much come back to me in my pay packet!!!!!

I agree with TerryW – be careful “interviewing” accountants because some of them will bill you for their time. As I mentioned in my previous post, we charge our time out by the 6-15 minute interval and that includes time spent on the phone, reading your mail, reading your faxes, reading you emails and interviewing you for your whatever.

Unfortunately a lot of accountants take the “time is money” saying to the extreme.