I own a successful company which has significant profits to invest with.
Is it wise to invest in property using a company?
Hi troyid
If it’s a trading company, then definitely not.
The problem with investing in appreciating assets in a company is that there is no CGT exemption, and will always be taxed at 30%. You have very little flexibility in distributing those funds afterwards also.
A discretionary trust is a better option – with corporate trustee, as this gives you better options tax wise when distributing profits. As for getting the money out of the company – perhaps you could lend it to the trust at the lowest rate the ATO will allow?
Cheers
MelHi Troyid,
Depending on if you are just wanting to purchase just +ve cash flow properties, use the Family Discretionary Trust.
If wanting to purchase both -ve and +ve cashflow properties it is ideal to use a Hybrid Trust.
Though not sure what exaclty your interest are, though if you like to invest into all types of investments, ideally again you should use a Multi-Sector Trust
Cheers,
sisHello,
Thank you Mel and Sis.
I have a discretionary trust, and have just checked with the ATO regards the interest rate required to please them.
Why can’t I use the discretionary trust to purchase negative geared property?
Hi Troyid,
A Family Trust, must run at a profit, losses are carried over into the next year and that you can not offset it against a lost. Which means taxs benefits are slightly different.
With Hyrbrid Trust, when you purchase -ve geared property you are runing it at a loss, thus mean you can offset this loss against another preforming asset or distribute all profits, so that the loss is minimal.
Cheers,
sisSiS,
Is it also true that a Hybrid trust carries on losses indefinately?
Any trust can carry losses-I beleive indefinitly until a profit is made.
Troyid, maybe you company shares can be owned by a discretionary trust. All profit could then flow to the trust and from there distributed elsewhere at the trustees discretion. (possibly with franking credits).
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
That’s smart thinking Terry. I reckon that idea has been in my head, but never really been crystalised before. [
]Cheers
Mel
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