Hello everyone
I am certainly new to the investing world, being a newly graduated professional in my first year of full-time employment. I am already looking towards financial freedom…
My inclination is toward property investment.
I have many questions, but the more pressing ones are:
– Can I form a company and purchase investment properties through that company?
– If I can, will all tax payable be charged at company tax rates?
– Are company tax rates less than personal tax rates?
– If I want to contribute money from my salary into the company to provide funds with which to invest, does the company have to pay tax on the money I give it (effectively meaning I’m paying tax on that income twice before I can invest it)?
– likewise if the company pays me some money, do I have to pay tax twice – company then personal?
– I have never held an interest in property before. If I purchase property through a company I form, will this make me ineligible for the FHOG (First Home Owner’s Grant) if I wish to apply for it in the future, or will I remain eligible as I do not personally own the property??I would certainly appreciate any advice in these matters.
RL
– Can I form a company and purchase investment properties through that company?
Short answer is yes. Long answer is, you probably don’t want to. There are so many aspects to this, and much has to do with what the future holds for you. Something you can only partially predict.
You could look at purchasing in a trust, more specifically a hybrid trust – first order of the day would be to get yourself a good accountant. Yes a bit expensive to start off, but worth it in the end. A hybrid trust can be more tax effective than a company.
I also know some accountants that say – at this stage of your investment career, it is not worth it, and you should just buy in your name. I would actually agree with that.
– If I can, will all tax payable be charged at company tax rates?Yes, but also remember you can only claim deductions at that rate as well.
– Are company tax rates less than personal tax rates?Company rates are 30%. Only you would know whether your rates are higher or lower.
– If I want to contribute money from my salary into the company to provide funds with which to invest, does the company have to pay tax on the money I give it (effectively meaning I’m paying tax on that income twice before I can invest it)?short answer No. There are many different ways to put money into a company. For Example a) You could issue shares to yourself at a certain price. b) you could loan the money to the company.
– likewise if the company pays me some money, do I have to pay tax twice – company then personal?short answer No. a) If the money paid to you is a company expense then it is before tax. You would have to pay tax on the income. b) If the company paid you a Franked dividend (div after company paid its tax) then you would either receive a benefit if your tax was lower than the companies tax, or have to pay the difference if you tax was higher than the companies tax.
– I have never held an interest in property before. If I purchase property through a company I form, will this make me ineligible for the FHOG (First Home Owner’s Grant) if I wish to apply for it in the future, or will I remain eligible as I do not personally own the property??No -if you buy an investment house and never live in it, it does not matter what entity you bought it in, including your own name, you can still claim the FHOG. BUT no advice is given here as rules can change, and may already have, and every state may have a different opinion.
Regards
JohnInspired Finance
(02) 9944 7776Thanks John
That was very informative.
I clearly need to consult a professional on this matter.
You don’t happen to be able to recommend an accountant in Brisbane who is savvy on financial matters for would-be property investors?
thanks again…
Most of what you have asked is basic Taxation information, so any accountant will do and overall it will be inexpensive.
If you want an accountant that has more knowledge of trusts, then it can start to be expensive. Send me a quick email and I will send you some details of a few.
Regards
JohnInspired Finance
(02) 9944 7776Hi RL,
I agree with John’s comments and advice except that I would recommend a trust if you are serious about building and protecting your property portfolio. As an accountant you may think that I am just trying to sell a structure, but once you see the benefits it is a no brainer in most cases. But as with most things, your personal situation will dictate the most appropriate structure, ie, married? children? income? other investments?
My first advice is to read read read, as much as you can without going too overboard so that you can ask your accountant the right questions, and importantly so that you can understand and benefit from the implications of your structure. As a guide, you could expect to pay anything from $800 to $1,500 for a family trust, $1,500 to $2,500 for a hybrid trust and $1,000 to $1,500 for a company. Your annual accounting fees could also range from $500 to $2,000.
If I can be of any assistance, please email me and I’d be glad to help you out, even if only for information.
Ross
I know of no investors who use a company structure – and I know some pretty savvy property investors.
Other than your own name I find the next most common structure to be the HDT.
You need to speak to a specialised accountant. there are two I recommend regularly.
All the best
Simon Macks
Residential and Commercial Finance Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
I know of one client of has purchased using a company. He now regrets it.
Companies are best for business as liability is limited.
Appreciating assets are best held in some sort of discretionary trust for both asset protection reasons and tax savings.
Terryw
Discover Home Loans
Parramatta
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
even my own companies are owned by trusts
Regards
JohnInspired Finance
(02) 9944 7776I just came back from a meeting with my accountant who himself owns numerous properties. He recommended a Family trust.
For only $500 (includes accounts fees etc) you still get a ABN number and tax is the same as a registered business.If you set up a business its almost triple the cost with no better incentives……..
Hi Dutchie
I agree discretionary trusts are great. But watch out if your properties are making a loss (ie negative geared) as the losses cannot be utilised until the trusts makes a profit. Maybe look into hybrid discretionary trusts if this is the case.
Also trusts are not taxed the same as a business. Trusts no not normally pay tax at all. Trusts distribute all income to a wide variety of beneficiaries who then pay the tax based on their own tax rates. So with careful planning the trust can greatly reduce tax or maybe even eliminate it altogether.
Terryw
Discover Home Loans
Parramatta
[email protected]
Sign up to my mailing list.
Just send me a blank email, with “subscribe†in subject line.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
All good advice here and I need to add nothing, but as I have not posted here for a while I just wanted to.
CATA
Asset Protection Specialist
[email protected]Hhehe Colin gotta keep those posts up.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
Looking for life cover – We Guarantee to beat any quote you have in writing.Richard Taylor | Australia's leading private lender
Hiya Richard
What posts?
I haven’t looked at this site in about 4 weeks. I was supprised how many posts there are. [lmao]CATA
Asset Protection Specialist
[email protected]
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