Hi, I am a uni student and am looking to buy my first property which is going to be positive cashflow due to my goals and want to try and figure out the best structure to use. I need to find out which structure will allow me to be taxed as little as possible on income from the property as I need as much of the income for reinvestment. I also want it to be reasonably legally sound. Brad Sugars who I have heard is very successful and has done very well out of property investment said that he uses companys here, and if he has made as much as is touted then there must be something in it. The way I see it is that it reduces his tax on his income as long as he does not pay it to himself, allows him to write off expenses and he avoids the legal worry by having a number of companys so his exposure with each one is limited. The other thing is surely if you are making enough you can afford good lawyers. I was plannning to follow this approach until someone told me that trusts have lower tax rates. When I talked to a “tax” accountant he said to go into it personally to avoid capital gains but I think that Brad also had a good point when he said to not sell anything it was possible to rent and earn from forever, and anyway surely it would be possible to refinance. Sorry for being so long winded and posting a topic that has already been reasonably well discussed but I did not get the answers I was looking for, any advice or help would be most appreciated, thanks
Zimonya
Hello Zimonya, and welcome to the forum.
Trusts do not pay tax – the beneficiaries do. Any capital gain is also passed to the beneficiaries, so you can minimise this if you do it right.
Companies don’t pay CGT, they just pay tax at 30% – which is the highest rate for CGT if assets are owned more than one year.
Trusts are also more flexible, and provide better protection than do companies.
I would suggest you look at obtaining Tax Battles and/or Trust Magic written by Dale Gatherum Goss. They will really explain how you can minimise income using trusts.
Cheers
MelThanks for your help melbear. I will read the book as I think it is going to take some getting my head round and is a very important aspect. The trust has to pass on all its income though, right? Which would mean that the main advantage of using one over doing it personally would be legal protection as you would hopefully earn enough to be in the top tax bracket and could only spread the income over so many rellys? Thanks again[^], most appreciated
Zimonya
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