Forum Replies Created
I’d be interested if anyone wants to get together for something “unstructured”.
Rod.
As the full depreciation is claimed at the marginal rate whereas you only pay CGT on 50% of the gain you’re probably ahead by claiming depreciation.
Rod.
It’s best to avoid cross collateralising as it should make it easier to sell or refinance as you’ll only have one property as security per loan. The only problem is that you can end up with lots of loans, but each property is effectively ‘stand-alone’.
This certainly sounds like a valid strategy (mixture of +ve and -ve to offset each other) if it suits your goals. I don’t think anyone here advocates that there is only one right way to invest.
Rod.
What was the rent?
It’s generally best to set up the structure first as there will be costs (CGT, stamp duty) associated with transferring them at a later date.
Different properties may require different structures. eg: a negatively geared property may be best owned by a high taxed individual whereas a neutral or positively geared one may be best to be held in a trust.
Rod.
Briefly,
If you use a company then the company pays tax at the company tax rate (30%). The company can then pay dividends to the shareholders who then pay tax on the dividend at their marginal rate. The shareholders receive a tax credit for the tax already paid by the company. Companies can choose not to pay a dividend and instead retain the earnings for future investment.
Trusts don’t pay tax but instead must distribute all earnings to the beneficiaries of the trust. In a discretionary trust the trustee can determine how much is distributed to each beneficiary.
Eg: if you have 2 beneficiarys, one of which is in the top tax bracket and the other not working you would distribute to the not working person as they are in a lower tax bracket. Distribution percentages can be varied each year so if the following year both are in the same tax bracket then you would do a 50/50 distribution.The most common structure is to have a discretionary trust with a company as the trustee. In this case the company is for asset protection only and does not pay tax as all earnings belong to the trust not the company.
It’s best to talk to an accountant and solicitor about the best structure – I’m neither so don’t take my word for it.
Rod.
Probably between 5 & 7.5% (plus GST), depending on how good you are at negotiating and how much they want your business.
I believe you’ll find that super funds aren’t allowed to borrow money.
Sounds right, maybe you shouldn’t access any amount greater than the agreed selling price under the l/o you have with the end purchaser. After all any capital gain greater than this amount isn’t really yours unless tha option lapses.
My understanding is that a discretionary trust gives you much greater flexibility than a normal family trust. With a discretionary trust distributions allocations can be varied according to individual tax situations each year. With a family trust the benficiaries ownership/distribution ratios are generally fixed.
I’ve been meaning to ask my accountant that for a couple of years and never got around to it. Maybe there’s some legal conflict of interest with the company both administering the trust (as trustee) and benefiting from it.
Hi Gracie,
The “standard” structure seems to be Family Trust with a company as corporate trustee (this is what we have). This offers greater legal protection than having an individual as a trustee. A second company should be able to added later as a corporate beneficiary if needed, you would need to ensure that the trust deed allows this.
