hi i am new to this game and was wondering if others have set them selves up as a company with a trust fund or just a company or neither…and if so when do you do this before you buy your 1st investment or after your 5th????what are the cost involved to set this kind of thing up??
Hey Kristine,
Your question on structuring really depends on your current financial situation and your investment goals. However…
company with a trust fund or just a company or neitherThe three structures you mention:
1. Company as trustee – this is the best structure according to Steve’s Wealth Guardian because it allows asset protection through the corporate trustee and income splitting through the trust.2. Company – any profit made by a company is charged tax at 30% so generally companies are not great ways of purchasing income or CG generating assets.
3. Individual – is fine if:
a) You are going to negatively gear (and pay a lot of tax)
b) You have a low income and only plan on buying a small number of + cf properties
c) You want to ‘test the waters’ before setting up a better structure4. You didn’t mention individual trustee – I actually like this option because it’s a cheaper way to start, still offers the same income splitting benefits, and its fairly easy to add a corporate trustee later on for more asset protection. In all honesty, if you have the right insurances you shouldn’t be too concerned about a having a company trustee unless you have a large portfolio.
when do you do this before you buy your 1st investment or after your 5thIf you are serious and want to build a large portfolio it may be difficult to purchase in your own name now, then transfer to a trust later (especially one with a corporate trustee) as this is a change in legal ownership which triggers a CGT event.
what are the cost involved to set this kind of thing up??Company – $1200+
Trust – $500+
Individual – free.We paid $550 to set up a trust with individual trustees recently…all you then need to worry about is the annual trust tax return which may be a couple of hundred dollars.
I hope this has answered your question.
-Nick
thanks heaps for your quick and large reply….what is a CGT Event??…My goal is the same as most peoples i want to make a lot of money and get out of this rat race..Property excites me i want to own heaps of them…
Nick,
That was a great post, really informative and useful as I am also looking at the Trust/company structure with its various pro’s and cons. Can I ask where your information was sourced? I am wondering how useful you found wealth guardian to be?
McDeyess
Dear All,
I just finished reading Steve McKnight “Wealth Guardian” last night. It cost $195, first I think it is so expensive for 69 pages of text and 1 audio CD. I readed the first 38 pages and feel that I have not gains anything so far as most of the information I knew before, but from page 39 onward I found the money worth spended and would recommended to anyone who like to build the property investment portfolio.
Kind regards
Chandara
[Keep going, you’re nearly reach the end of financial freedom][
][]Kristine a CGT event is shorthand for a “Capital Gains Tax” event. In its simpliest form a capital gain occurs when you sell a property for more than you paid for it. CGT doesn’t apply to your Principal Place of Residence (PPOR or PPR). It is a fairly complicated part of the Tax Act but you can read up about it on the ATO web site or in any Master Tax Guide.As for structuring. There are lots of options all of which I think depend on your attitude to risk and how large a portfolio of properties you are attempting to accumulate. This is an area where you should seek the advice of an Accountant that has knowledge of asset protection structuring. Alternatively there is a legal practice in Queensland that has a Legal Resources Club and offer advice on structuring. Cleary and Hoare is their name. You could try contacting them.
Hi all,
I asked my accountant the same question last week, he stated that an individual trust was the best option in the initial period. He did however state that a company structured trust gives continuity in that individual trust accounts become untidy if and when the appointed benificeries either die or move on.What are your thoughts about investing through a company that is owned by the trust?
We already have that structure set up with our business. i.e. family trust owns shares in pty/ltd company, and this company owns/operates a number of businesses e.g. company xyz Trading as bunsiness xyz
Is it better investing through the trust or the company? As the company already has ABN etc.
Stephen…
Hi everyone,
Lots of questions…all which generally have the same answer, that is – depends on your investing goals!
Kristine:
what is a CGT Event
Put very simply, it’s caused by a change in legal ownership of an asset (shares, property…etc)mcdeyess:
Can I ask where your information was sourced?
Wealth Guardian is a good starting point. I also recommend DaleGG’s “Trust Magic”…however a lot of my information is just from talking to accountants, reading websites, etc…Hame:
company structured trust gives continuity in that individual trust accounts become untidy if and when the appointed benificeries either die or move on
true to a point. However it is pretty easy for the Appointor or a trust to sack the current trustee and appoint a new one. So as long as you have at least some family members under 60 you shouldn’t have a problemmadeinoz:
Is it better investing through the trust or the company?
Most people would agree trust, because it is likely that the company is also a beneficiary of the trust. If you only invest through the company you are effectively locking in a 30% tax rate, whereas if you invest through the trust with a company as a beneficiary you are only limiting your tax rate at 30%Hope this helps,
-NickThanks Kelly for your advice but i am in Melbourne…..i spoke to my accountant today he advised against trust funds and companys as he says your house you live in is never protected cause if things turn sour the director of the company is still liable so please what do you think about this??? do i need a new accountant what are the pros and cons??? Accountant also said their are set up costs and annually cost which are around 2,000 a year is this true??
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]
Hi there Kristine,
I know exactly how you feel because Im in the same situation. What I am doing is setting up a trust with a company as trustee form the start so its easier to manage in the future. I am trying to find out the exact differences between a Hybrid Unit and a Hybrid Discretionary.
At the moment I am reading “Trust Magic” by Dale Gatherum-Goss which walkernick recomended.
I checked Dale’s site out on the internet and saw he is located in VIC.
If you want to check it out the site is
http://www.gatherumgoss.comAdam. [
]
][
The topic ‘company trust fund or both???’ is closed to new replies.
