Forum Replies Created
Hi Carlin
I’m not suprised your confused. Unfortunately, there are a lot of accountants (and solicitors)who just don’t understand trusts.
Suggest you buy yourself a book (Dale GG’s is a good little read)or McKnights Wealth Gardian to bring yourself up to speed so you can talk the same jargon.
When it comes to HDT’s there isn’t a huge amount of published info out there, but run a search here or on the somersoft site.
However, I find for people starting out that land tax is the biggest trust structure killer, (in NSW). Once clients get above the threshold then it ceases to be an issue, but until then it really is a thorn in the structuring side.
Regards
Tony
SC7
Asset protection and flexibilty (income tax and stamp duty) is the issue.
A partnership/JV or whatever you want to call it of trusts (the most flexible being Hydbrid discretionary) goes a long way to solving most, if not all of the issues. Combined with a deed of partition on the title you have the flexibilty of some partners wanting to sell “their” allocated units on completion and other partners retaining theirs without stamp duty issues on transfer (this is the case in NSW best to check in VIC).
The tax (ordinary income for those that sell and CGT for those that keep their units ) issues are simpler with a partnership as there is no triggering of a taxing event and the controlling interest test is often failed with a unit trust as you proposed.
As the partners are trusts (with Corp trustees) then this goes a long way to protect other assets should things go wrong on the job. You can go one step further and appoint a nominee company to deal on behalf of the partnership to streamline admin, things like signing building contracts ect.
I guess the hard thing is to find the right accountant and solicitor to assist (without learning on the job). And I’ve found the best way is to ask recommendations from people who have done developments with unrelated people.
Good luck
Regards
tony
Hi Carl
I enjoy reading your posts as they often get me thinking…As I see it we get 2 types of clients, those that want watertight guarantees and those that understand the risks involved with tax and are prepared to run with those associated risks.
If you “need to know this for sure” then my advice to you is to get an ATO ruling on the issue.
Regards
Tony
Sparky
An architect is a just like a hammer in your toolbox. Along with a surveyor, town planner, drafts person, consulting engineer (hydrolic, structural ect), landscape architect and the list goes on.
In engaging an architect they ought to be able to pull a team together to assist you in achieving your vision. Of course they can then complete the construction drawings, put it out to tender and then supervise the job to completion. It all comes at a cost, usually % based.
My architect mates reckon they are good value (then why are only 5% of all jobs architect designed?), my developer and builder clients reckon they are tossers and a waste of money, either way you ought to talk to both types (architects and turnkey type builders) to see which suits you and the specific job best.
regards
Tony
Hi Chelley
Sounds like you have stalled and it could be for a wrong reason. Could be worthwile taking to one of the larger banks relationship managers or a broker.
For what it is worth, we are with a great business banking manager with NAB and she is really part of our team. 15 months ago at the bank Christmas drinks she mentioned we were conservative borrowers so we promptly went out and doubled our property portfolio ($ wise) and her service sensational.
That said we don’t have everything with her as we have a seven figure commercial facility with Bankwest, (great rate being the best thing going for it). She is aware of it so it keeps her keen.
Regards
tonyH
You made a profit well done.However you are going to cost yourself ,000 of $ in overpaid GST by self preparing your BAS.
By all means read up on the GST Margin Scheme on the ATO website but get your accountant to review your BAS’s. the money will be well spent.
Regards
tonyJust read Ed & Tony’s new book and is a good place to start.
regrds
tonyHi Sweet
The book that kicked me into gear many years ago was a little one called “Buying property with OPM’s” by Allan Falkner (?).
The thing that I noticed between those books from say 20 years ago to now is the current ones often just seem to be marketing tools to onsell other services….. Oh well the world has changed.
Regards
tonyI reckon its more of a case of going against the Australian dogma of home ownership. I don’t bother even trying to explain anymore why we rent when people ask us who also know we have a property portfolio. It’s a bit like trying to teach a pig how to sing, your wasting your time and you only annoy the pig.
Regards
Tony
PS the only tax break on your own home is the CGT expemption on saleSG
the easiest way to gain the certainty you are after is to apply for a private ruling from the ATO. These are quick and easy to do. And you have it in writing should get an audit at a later date.
Regards
Tony
No.
It’s easy to sell your reputation but you can never buy it back.
Regards
TonyDave
Any truth in the rumour you guys are bailing out of Buffalo?
Regards
Tony YoungHi Carl
The losses carry forward until you can offset them with income (both normal and capital). Check with your accountant the Family Trust Election requirement.
Regards
Tony
Concrete?
Hi Michael
My wife Bonnie will be the first to agree that only 2 years ago she struggled against coming on board the journey to become financially free.
Looking back now she would say she thought it was my role to do the finance stuff and whilst she had 2 degrees and a great career (a geologist) she threw it in to raise our boys, (now 3, 5 & 7). And she just didn’t have time to read any books let alone investing books.
Things are different now, she manages our portfolio, both residential and commercial here and overseas. The rewards for her have been far more than the monetary things (which are nice) that spin off from our teamwork.
To pinpoint the change? I like to think it was my unending enthusiasm which culminated to a tipping point when I “dragged” her along to a Steve & Dave seminar. Where she said (with all due respect) if these boneheads can do this so can we. And we have.
I have no doubt you can achieve your goals on your own but we have gotten there quicker working together. Let me suggest you start by asking your fiancee, her needs, wants and desires. And work with those with the view to getting her on board.
Regards
Tony
Hi
Your absolutely right resiw, always best to negoitate before running to a solicitor. (I do have a relationship of many years with mine and trust him and his firm without any doubt whatsoever)
However, having exhausted all options to negotiate directly with all the 3 downstream nieghbours (for an easement) and with the council engineer (to allow stormwater to flow out the front of the property) the only options left are to take the council on in the L&E court, challenging the council engineers calcs or take one of the nieghbours to the L&E court to have a easement granted. Like water flowing downhill (terrible pun) its always best to take the path of least resistance hence my decision to issue a writ to the weakest (financially) link which happens to be one of the neighbour.
Surely I’m not a pioneer with this as I thought with so many long time experience full time developers on this forum it would have been a well trodden path of “problem + solution = profit”.
Regards
TonyOriginally posted by Mortgage Hunter:I believe another popular strategy is to sell one and keep one with selling proceeds going into the loan which leaves you with a very pos geared high depreciation IP. From contract to contract being approx 12 months this leaves you with the 50% discount on CGT.
Hi Simon
Couple of traps for young players from an income tax and GST perspective.
Selling one on completion and you will find yourself “carrying on an enterprise” (assuming the sale price is more than $50K) and will have to register for GST (use the margin scheme). No big issue with this but your profit on sale will be treated as normal income and the 50% GCT discount will not apply.
Clients then say to me, “No worries then I’ll rent it out for 12 months to access the 50% discount.” Good, but be aware you are selling “new residential property” and the 5 yr GST rule will apply, (again use the margin scheme).
Finally, for Robbo, take care with building and selling PPOR’s one after the other especially if you are also in the game of building and selling homes as the ATO had clearly tagged this for audit activity, they have implied the PPOR exemption may not automatically apply.
Best to know your tax obligations in advance as they will influence your sales decisions.
Regards
TonyOriginally posted by resiwealth:My question is why the council never allowed for this or did they in their overall development plan.
resiwealth
Block is in beachside suburb originally surveyed in the 1920’s when no one wanted to live there where as now almost everyone does. So only recently the council just threw a high density zoning over everything in the suburb. The result is you have a high density zoned block but it will not meet the councils stormwater plan (my engineer reckons we can get the water away at the front without going via an easement but the council engineer doesn’t like it so he is in effect the judge, jury and executioner + no pump outs allowed here) and the only way it can is to get an easement. If the neighbour doesn’t want to grant one (even after offering a considerable sum of money) then the only recourse is to go to court….
I imagine are some experienced people here but maybe this is too touchy a subject.
Regards
TonyHi Terry
What can I say, some people will just never get it.
A private ATO ruling, based on the facts of the transaction is a cheap insurance policy for those who seek certainty. It turns opinion into fact.
Regards
TonyHi Terry
Carl said
“Hi guys
I’m considering the following scenario:
I draw some equity out of a property I own and lend the money to a discressionary trust that I contol.”
As soon as I hear this warning bells go off. Two reasons. Firstly case law is very clear on this matter. Secondly, methods to circumnavigate are costly (legal fees and stamp duty) and most clients just pay lip service as they cut corners due to our self assessment system.
Carl could always get a private ruling from the ATO.
Regards
Tony
