HISTORY:
Ok I will start from the beginning. I am young and had an accountant and although I explained to him that I was buying properties and asked for advice he never explained to me anything about a trust etc, so after reading this site I have 3 properties in my own name and i feel like throwing up.INVESTMENT GOAL:
To keep acquiring investment properties and rent them out, then when I am retiring to either keep the properties or cash them in. I am not in a sue position now, but I guess as I acquire more properties and get older I will be more prone to this and require a more asset protective system then.I have 3 questions:
(1) How do i set up a trust, company, super fund with respect to purchasing future properties.(2) Can I do anything with my current properties to transfer them into the trust, company, super fund etc.
(3) I am new to this so if I don’t understand something can I email you?
May the power of the dollar be with all of you!!
Alex
Alex,
It’s not that bad to not have a Trust – I know people with more than 20 properties who buy all of them in their own names.
To set up a Trust consult a good accountant. One, who unlike your current accountant has experience with property investing & investing in general & in establishing Trusts.
You can also get a copy of Trust Magic (www.gatherumgoss.com) which will give more more information about these vehicles.
Bear in mind there are different types of Trust & some types will be more appropriate than others for your needs.
Next – you can transfer your existing properties into a Trust, however it will cost you stamp duty plus any necessary modifications to loans (could require entirely new loans or simply a change in the entity – consult a good mortgage broker). Frankly you may as well not transfer them and save the money – as I said early it’s not that bad
Finally – post on a property forum anytime & you’ll get advice & explanations…their quality will vary, but on balance it should address your questions more than adequately!
Cheers,
Aceyducey
Hi Alex,
there is no power in the dollar – but there is power in knowledge and knowledgs produces money…
kind regards,
George.“If You never never ask, you’ll never never know”
To learn more about setting up trusts, go to http://www.lawcentral.com.au and register, then go thru the process of designing your own discretionary trust (all for free). If you actually go to the end and pay $275 you will get your trust deed on the spot – via a PDF file. Print it out and take it to the office of state revenue and pay your stamp duty – $0 in QLD, $200 in NSW, and that’s it.
But because there are different types of trusts and different stategies, going and getting some advice may be better in the first instance. It can cost from $1000 to about $2000 to setup a trust thru an accountant.
Tranfering existing properties will incurr stamp duty and require new loans to be taken out as Acey said, but you will also have to pay CGT as it is considered a sale. It may be better leaving as is, and buying all future property in a trust.
But it still may be worth looking at as you could release ‘profits’ which could be used to pay down non deductible debt and then reborrowed again for investments.
find a good accountant.
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
Quote:Originally posted by Terryw:but you will also have to pay CGT as it is considered a sale.
Quote:This is true if you sell AT A PROFIT – the other approach is to sell to the trust at the price you bought it at & avoid the CGT entirely.Then refinance the property once in the Trust.
Just be cautious about setting your own comps
Cheers,
Aceyducey
Aceyducey
Good idea, but you would have to transfer at market value, or at least pay tax on the market value. But you could reduce the CGT by seeking a few low valuations so if you are audited by the ATO, you could back up your case.
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
Originally posted by Terryw:Good idea, but you would have to transfer at market value, or at least pay tax on the market value.
Market Value = the price agreed on by a willing seller & a willing buyer
You don’t pay tax on a price you don’t pay.
I suggest daaussie that you check it out with your accountant (as I hope you would have anyway).
Cheers,
Aceyducey
Becareful, you will probably need an independent valuation done to satisfy the ATO. The tend to look quite closely at all deals that aren’t at arms length.
Rgds.
Lucifer_auHi there, we have not set up trusts for any of our IPs, we also have a company/business which I guess puts us in a higher risk category.
I am surprised that our accountant has never advised us about trusts etc. I have only now started to look at this since joining this forum. I doubt however that I would transfer existing properties in trusts. Sounds way too costly …. and a hell of a headache
Your right Marisa…it is a hell of a headache, especcially for your accountant – that’s probably why he/she hasn’t told you about it. It’s too complicated for them.
Kind Regards,
George.“If You never never ask, you’ll never never know”
Thanks George…..
I’m just setting up a Trust now and my accountant says $500 tops. I’m not going to the trouble of setting up a company on top of it for added protection because I’m just not convinced it’s necessary.
I have a company, but I dont use it!
My accountant told me to forget trusts and using the company. he still maintains that the chances of being sued are low, like why bother. That is not to say you dont insure!
There is only me, no family, no one else, so all my properties are in my own name.
But I will keep thinking about it all.
Elves
” a blind man may see what a sighted man may not”
Seems a lot of professionals out there lack specialised knowledge about property investing. There is a lot to know-, a referral for an accountant / mortgage broker etc off the website could save you a fortune and a lot of headaches! Just do your research I spose!
Im sure they had a special on “too hard baskets” at officeworks recently!!!
Generally, I think you’re all (esp. those of you who are in the “i don’t think it’s that necessary” category) are not realising the potential risks you are placing yourselves under…Many people who haven’t “bothered” or didn’t want to spend “unnecessary” $$ on protecting their assets substantially lost everything as a result of just one unforseen disaster…it can and does happen. Try to save money in other ways, but not on something that can save you from losing everything who have worked for…
On a slightly different note…and i’m not sure about this…I’ve heard that if you plan to own dozens of IP’s, one trust is not enough…E.g. Disaster happens>>>insurance can’t cover>>>IP where disaster happened under ownership of trust in which there are your remaining 35 IP’s>>>all properties in trust are at mercy of courts??
Therefore, to ultimately protect yourself you would need insurance and several trusts (depending on how many IP’s you own)…I am just starting out myself, but wouldn’t that be a lot of tax returns?
Like I said I’m just starting out and really am not sure about how tax applies to trusts/companies…
Cheers.
ArthurK
heya,
Well i think what ArthurK was pointing to is that each trust has a limit in terms of land value. I think it’s 500000 ? before u get taxed for it ? some sorta extra tax levied on the land value of the properties that trust holds.
So when you have a few IPs and the land value is near the limit, then i suppose that’s the time to set up a new trust so to avoid land tax.
Also, u could have different trust controlling IPs from different countries / localities, just to make the management easier perhaps?
Kev
There’s no Such thing as No Can’t Do!!!!!
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