The Tax Man kills everyone!

Hi Jaffa,

An impossible question because you haven’t indicated how much your total income is – which is the key determiner at tax time.

Check out the following scales and this will help you determine your taxation rate.

Income levels Tax Due Excess %
$6,000 – no tax up to $6K + 17%/$1 thereafter
$21,000- $2,550 tax + 30%/$1 thereafter
$52,000- $11,850 tax + 42.0%/$1 thereafter
$62,500- $16,260 tax + 47.0%/$1 thereafter

So on a total earning of $10K you wil pay no tax on the first $6K and then 17% thereafter = total tax bill of $680.

The distribution of the income from a trust will determine the tax paid by individual in accordance with their repestice income levels.

One of the advantages of a trust (the main one being asset protection) is that the income can be distributed to the trustees in a manner which reduces the total tax paid – not an expert on trusts – so I stand corrected

Derek
[email protected]

Property Investment Support Available. Ongoing and never stopping. PM welcome.

Jaffasoft,
my accountant said that as a general rule he would only put appreciating or income producing assets in a trust, e.g. real estate, shares, objets d’art etc., but individual cases vary.
Terry

Terence McMahon
HomeWin
Finance

To properly use an Accountant you have to know as much info as they do, so I would do as TerryW suggests! Because the more you know, the harder they will work for you, and the less tax you will pay.

In regards to your plan. It’s isn’t that difficult. All you want is a trust set up, with a corporate trustee (this is a company that acts as a trustee, thereby adding an extra layer of protection, so if you are sued, you can replace the directors (i.e. you) with a family member, and continue on as normal). And have a range of beneficiaries inc. family (though do tell your Accountant about your fathers assets – that is important for certain legal implications), companies and a charity. This applies for pretty much all RE transactions: buy and holds, flips, renos, raw land purchases, development, etc, except wrapping or LO’s. Also you will want to be the Appointor, as this person dictates who (or what) runs the trust, and they can fire the trustee, so pretty much all power lies with them.

If you are wrapping then you only really need a company (mainly because there is no CGT payable, and the great benefit of trusts is that they provide a 50% discount off CGT, so 30% to 15% and better personal liability protection, that’s about it). So if you are starting off wrapping, don’t worry about trusts, all you need is a company (but follow the law/rules in regards to running a company).

If you have a mixture of buy and hold and wraps, create the above trust structure and then place the wraps in a company that is the beneficiary of the trust (keep the corporate truste (which is company that runs the trust) separate from the beneficiary ’wrap’ company).

Also with the use of accountants, the idea I like is basically a book keeper (to do all the boring stuff, putting house under the asset collum, income in, etc) and having an one accountant as a main advisor, one that you can throw off ideas (via email) and he will think about and then tell you how to do it (as opposed to one who won’t tell you anything or tell you it’s illegal).

In regards to putting other business in a trust, I would encourage a separate business, as you don’t want taint your RE assets with, for example you web company (which could be sued by a customer).

Buy the book TerryW suggested. It provides all the other answer.

Rgds.
Lucifer_au

Are you talking nett profit or gross profit, what type of tax structure are you illuding to, how many properties do you own now, how many benefeciaries do you have, ??? clarity leads to the truth.

Seek professional advice – the advice in this thread is getting positively dangerous!

Cheers,

Aceyducey