Forum Replies Created
Thanks IP Freely,
Great name by the way. I am from QLD so I will search for a QLD Fair Trading Website for a lease template.
I will ask my accountant about question 2 as it is the most important one. I have heard of instances where the tax office has ruled that because an IP was rented at below market value the person could not claim the full amount of interest and expenses for their tax return.
Mitch
Thanks Terry,
My wife and I don't have any personal debt other than one IP which is in our name. I plan to keep this property geared as high as possible to maximise our personal tax benefits and try to get the IP's in the trust's name + geared. At the moment the money we are gifting to the trust is after tax dollars however when we use equity from our personal IP I guess we will need to LEND the money to the trust with a legitimate loan contract (i.e interest and repayments) so that we can still claim the entire deductions on our person IP loan. Am I on the right track here?
Mitch
Thanks Andrew I will give it a go.
Mitch
Hi Louiero,
I would suggest that you first do some reading/research into property investing. There are many great books out there that will explain the pros and cons of everything real estate. Once armed with this information you will be able to make an informed decision on what it is you want.
There are no magic formulas that will tell you whether an investment is good or bad, whether it returns an adequate rent etc. However with a bit of research into the area you are looking at you will find what rent average properties are returning. You can also find long term trends for capital gains, population growth etc.
You mentioned you want to reduce yout taxable income, this is a starting point. This means you may want to consider purchasing negatively geared property in your name. Later on you may even decide to purchase other property in the name of a trust. You could revalue and redraw you first loan to purchase cashflow positive property in the trust. This would reduce your personal taxable income and allow you to distribute the trust profits in a way to minimise tax.
If purchasing a neg geared property you should look at its historic sale prices. If a property has performed well over the last say 20 years than it is more likely to continue doing this into the future. In saying that you should never use information without understanding it i.e Why did they property perform well in the past (location, style, size, scarcity of land etc.), is there any reason why it shouldn't continue to perform well?
I hope I haven't confused you more. If you have a more specific question feel free to ask.
Mitch
Hi Maurice,
Ok I guess it would be smarter for me to let an accountant handle the tax returns. I was under the impression I could claim all setup costs as an expense in the first year and carry the loss forward so I was thinking about completing my own tax return for the company (I assumed it would be easy as there is no income and only a few expenses).
As im sure you can tell I am still a greenhorn at this however it is a great interest of mine and I want to learn the ins and outs of tax issues relating to discretionary trusts.
A bit of background info: Im 23 years old, married with no kids yet. My wife and I have one IP in our name and my brother and I have 2 IP's in the name of a disc trust (trustee in a shelf company with us both as shareholders). At the moment all properties are negatively geared however we are planning reno's to the trust IP's to increase their worth and return over the next 6 months (we have already done the kitchen in one).
Over the next two years or so our plans are to subdivide one of the blocks (townsville house on 1200m3) and build a duplex and rent, continue renovating the two trust IP's and hopefully get into the US real estate market.
I am sure I will have many further questions to ask over the coming months/years and I look forward to contributing to these forums in the future. Any opinion/guidance would be well appreciated however I understand that any information on this site is given with no knowledge of person circumstances and should not be used without professional advice.
Regards,
Mitch
Olli,
I guess you were writing that for me so thanks. I will take the time to do some research on both.
Mitch
Thanks for the advice Maurice,
Another quick question. Do I have to complete a tax return for the trust AND company every year or just the trust? I assume I can claim the cost of setting up the company (and yearly costs associated with it) when I fill out the company tax return?? Can I carry the loss forward (just for the company, I know I can do it for the trust) each year until the trust makes a profit and distribute some money to the company to offset the loss (I assume I could then gift the money back to the trust for further investment)?
Sorry for all the questions but I'm excited to finally talk to someone about this type of structure. Its been very hard to get valuable information given that I don't know anyone (personally) that invests in this way.
Thanks again,
Mitch
Thanks Richard,
I will give him a call in the new year.
I am also a bit worried about getting my tax done for the company and trust. I have already done my personal tax (I realise now that I should get the trust tax done first) however the trust made a loss this year so this shouldn't be too much of a drama should it?
Thanks again for your help I really appreciate it!
Regards,
Mitch
