I have recently talked to my solicitor and accountant about setting up a HDT to begin our IP portfolio. My accountant wanted to know what benefit I thought I would get from operating in a trust aside from some asset protection. He seemed to think that if the bank want your property they will find some way to get it anyhow. My solicitor seemed to think that while they were all the rage years ago for property investing, they were maybe now not quite so popular due to problems when you want to sell up the assets and close down the trust and that they were expensive and time consuming to run properly! I don’t think either of them think we need one (or maybe they don’t think that I will get big enough to warrant one???) I know that with so many experience investors using trusts that there must be good reason for it. I have read Dale GG’s books and can see that there may be benefits for us but I don’t understand enough about tax planning to argue my point. I went to a recent propertywomen.com seminar in Melb and all but one of the speakers operated in trusts. Are my regional experts behind the times or are there reasons specific to our situation that would negate any benefit? Would love some help from those who can.
One more thing. Who sets one up? My accountant said to talk to my solicitor and my solicitor said I should talk to my accountant. Thanks guys for any advice you can give.
Julie Fisher
Daryl Fisher Homes.[confused2]You’re accountant seems uneducated. The point of a trust is not to prevent the bank from getting your property, but other’s. The property will be used as security for the loan anyway, so the bank can definitely get at your property if you were to default. Did he mention all the tax advantages of a trust?
I tend to agree with the solicitor. HDTs were all the rage a few years ago. Many got one just because it was the in thing, not understanding them. I have seen a few clients who had been using them incorrectly – for years even, unaware. HDT can be very good in theory, but there are many problems such as the high running costs, complexity, the fact that most accountants don’t understand them. And there are many accountants that are doing things wrong which could come back and bite the client.
eg. the units, when these are redeemed by the trust, it probably should be paying market rates for them. So there are problems on how do you value the units. Some accountants apparently advocate that the units can just be redeemed for the purchase price. I think the ATO will be not too happy with this approach, and I hear that they have set up a little team looking at HDTs.
Generally it is the accountant that should be setting up the trusts. They are able to purchase ready made deeds and just help you with deciding who will be the unit holder, trustee, appointor etc
Terryw
Discover Home Loans
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Hi Julie,
Find a new Accountant!!
Accountants are natourisly conservative. Having worked myself in the industry for 15 years I know from experience that many Accountants are conditioned to be conservative. Each tax agent is required to meet certain lodgement guidelines set down by the ATO which puts firms and staff under enormous pressure to reach these targets. Their business evolves around meeting these deadlines and GST compliance has only strained this further.
As a result many Accountants are too busy to take the time to effectively help their clients with tax planning and structuring matters, instead only doing annual tax returns. Their livelihood also means keeping their noses clean with the tax office, so most Accountants tend to tackle issues from a negative point of view of “why it can’t be done†rather than looking at alternatives. I’m not suggesting for a moment that you should avoid tax but you should be taking every legal step to minimise the tax you pay. So I’d be looking for an Accountant that’s experienced themselves in property.
Sadly I can’t offer you a referal in Melbourne, but maybe someone else of the forum can help you.
AmandaBS
http://www.propertydivas.com.au
FREE online Property Resources“It is better to be inconspicuously wealthy, than to be ostentatiously poor…”
Hi Julie,
My accountant (Nancy Keep, http://www.nancykeep.com.au) has helped me setup companies and HDTs. She is a property investor herself and should be able to help you.
You can contact her and mention my name.
Regards
Sanjiv Gupta
**************“There is no passion to be found playing small – in settling for a life that is less than the one you are capable of living.†– Nelson Mandela
Dale Gothram-Goss is one of the leading experts on HDT’s certainly in Victoria.
Not sure if he still taking on new clients but if you want a recommendation you could not go past my Accountant.
Let me know if you need a recommendation Julie.
Given yours and Daryl’s occupation a Trust might make sense as a way of protecting Assets.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
New 100% Shared Equity scheme coming soon – Email us for details.Richard Taylor | Australia's leading private lender
Thankyou Sanjiv, I am certainly interested in your accountant as she teaches MYOB. I have used that MYOB accounting software for 7 years and it still amazes me that my accountant and his staff still have to ask me to provide information (that is readily available on the disc I provide them) in order to finalize my returns every year. It would be soooo great to hand someone my well kept accounts and not have to explain them..(I’m not an accountant).
Thanks Amanda for your support. There are many threads regarding these types of questions. I suppose that when people start out it is very daunting but they only want to get info specific to them; then they see hundreds of different opinions and worry that they will listen or take advice that doesn’t suit their situation best. It is great to know that experienced investors with financial knowledge can let you know which direction to head and where to find answers.
Ta Richard, in a perfect world many people would have Dale Gatherum-Goss looking after their financial affairs, but I have read on another forum that he isn’t looking for more clients. I was hoping that he would reply to this question in the somersoft forum as another accountant was fairly critical of HDT’s. The feedback on that forum has not been as positive of HDT’s as on this forum so I am pleased that some forum members have raised the flag for them.[rambo2]
Julie
Hi Julie. HDT pretty much came to an end in 1988, when HSV took over Holdens’ ‘performance’ division after disagreements with the late Mr. Peter Brock. Having ditched my long love of Holdens around the VT Commondore era, I am more interested in Tickford, and of course their ‘evolution; into Ford Performance Vehicles (FPV) now…oh wait – ahhh wrong forum, this is real estate not cars! Sorry. HDT ? I’m thinking Holden Dealer Team, not Hybrid Disc. Trust ! [confused2]Seriously though, it can be a bit daunting (even confusing) with what appears to be the majority of investors using one of a variety of different trust types. If it works for you as they say, but I found what Margaret Lomas had to say on trusts in her very latest book made me take a more realistic approach. That said, I can certainly appreciate why many people feel more comfortable using a trust of some sort. All the best with your journey Julie.
Originally posted by v8ghia:Hi Julie. HDT pretty much came to an end in 1988, when HSV took over Holdens’ ‘performance’ division after disagreements with the late Mr. Peter Brock. Having ditched my long love of Holdens around the VT Commondore era, I am more interested in Tickford, and of course their ‘evolution; into Ford Performance Vehicles (FPV) now…oh wait – ahhh wrong forum, this is real estate not cars! Sorry. HDT ? I’m thinking Holden Dealer Team, not Hybrid Disc. Trust ! [confused2]Seriously though, it can be a bit daunting (even confusing) with what appears to be the majority of investors using one of a variety of different trust types. If it works for you as they say, but I found what Margaret Lomas had to say on trusts in her very latest book made me take a more realistic approach. That said, I can certainly appreciate why many people feel more comfortable using a trust of some sort. All the best with your journey Julie.
Funnily enough I come from the home town of Rick and Todd Kelly (whose dad owns the Holden Team now) so I probably understood more about the top half of your reply..lol. [laughing]
Seriously though, I have read one of Margaret Lomas’ books and really liked her approach. What is the name of the book you read?
Julie seriously with 4 children you should really be looking into a Trust structure.
Cheers
Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
New Shared Equity scheme has arrived – Email us for details.Richard Taylor | Australia's leading private lender
Hi Julie …..those Kelly boys sure can drive that’s for sure! The book of Margaret Lomas I read this in was the newest one, called ‘The Truth About Positive Cashflow property.’ (Where she has a go at all the seminar spruikers etc etc. I found it was a good book to help me ‘balance’ things a bit, particularly that ‘unless you take plenty of risk and own at least a dozen properties you are a nobody…. viewpoint that seems to come accross with so many other books of late – and I did particularly find her thoughts on trust structures interesting, as it can seem almost ‘non fashionable’ if you don’t have one sometimes. Based on your excellent posts, and where you are up to I think you will really enjoy this book. (I am no relation to Margaret.) That being said, If Richard Taylor (the real one, not the bogus one that appears on the forum from time ti time -[angry2] ) knows enough detail about your circumstances to suggest you look at a trust there must be a very valid reason. Don’t think there would be many around with his level of real world experience that offer practical suggestions on a forum at no cost witht the motive of trying to help. (unlike some of the people alluded to in the book in question) .
And, back to the important stuff, was’nt it a great year for Craig Lowndes in 2006 ! [thumbsupanim]Thanks Richard and v8ghia. I have placed my trust in Richard who does know our financial status and although I don’t know him well enough yet, I can see that he is certainly respected on this and other forums. So this is just to let everyone to know that I have decided to go with a HDT.
Thanks all for your posts, all the advice was appreciated and from the amount of people who read the thread, not just by me!![hair2]
Long live the days of the Holden Dealer Team hey!!!
On a side note,Jfisher,didnt Tom walkinshaw buy the hsv racing team last year ?
Or maybe hes just team manager now?
Im a HRT man myself![mario]But yer back to property,
HDT s , I would say just be careful as to how u set it up and who u use,as if not set up to suit yr requirements it may have limited benefits and actually hold u up,firstly in a borrowing sense and for asett proptection.
Definately get a few different opionions from full time investors who ve done it both ways,
with and without a trust.And Go the holdens this year ,
PS.The clipsal 500 is on this weekend in adelaide.[strum]“Don’t let yr character be impacted by yr surroundings, instead make yr character impact yr surroundings”
– Rachel Scott(17 yr old killed in columbine shooting 1999)http://rachelschallenge.com/Luke Taylor | Hope Property Investing
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Someone has just alerted me to Chris Batten’s reply to this same question posted on another forum:
http://www.somersoft.com/forums/showpost.php?p=273254&postcount=21It seems HDTs are looking more and more unstable, taxwise, day by day.
Chris Batten is a tax and trust expert. see http://www.chrisbatten.com.au
Terryw
Discover Home Loans
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I use NickM for my HDT who is one of Chris Batten’s favoured accountants http://www.strategicwealth.com.au
Nick tells me that he is well into negotiations with the ATO re hid trust deed and they they are definitely on the front foot with them.
Cheers,
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.
Originally posted by World Changer:Long live the days of the Holden Dealer Team hey!!!
On a side note,Jfisher,didnt Tom walkinshaw buy the hsv racing team last year ?
Or maybe hes just team manager now?
Im a HRT man myself![mario]But yer back to property,
HDT s , I would say just be careful as to how u set it up and who u use,as if not set up to suit yr requirements it may have limited benefits and actually hold u up,firstly in a borrowing sense and for asett proptection.
Definately get a few different opionions from full time investors who ve done it both ways,
with and without a trust.And Go the holdens this year ,
PS.The clipsal 500 is on this weekend in adelaide.[strum]“Don’t let yr character be impacted by yr surroundings, instead make yr character impact yr surroundings”
– Rachel Scott(17 yr old killed in columbine shooting 1999)http://rachelschallenge.com/Hi worldchanger
I’m not sure anyone knows who, exactly, owns HRT and HSV at the moment. Skaife did own one and the Kelly’s owned the other but after acknowledging last year that they were operating as one unit (not allowed) some teams want the book thrown at them. No-one is sure that Tom didn’t have control all along as he did own one or both teams years ago before he went into F1. Anyhow you would probably know more than me as I am a FORD follower, and now that i have four children it has meant that I know less about it now than I did before.
I have spoken to an accountant that does trust work this morning. He said that the ATO is looking at trusts carefully at the moment to see if the boundaries are being pushed within those structures, particularly those people that are attempting to apply the allowances of others private rulings to their own structure(I think that is what he meant). If the ATO begin to think that they are loosing too much money then they will probably issue a blanket ruling for everyone to abide by. He did mention that people that have their trusts set up properly have nothing to worry about.
After that discussion I have been advised that our situation doesn’t need a HDT; a normal DT will suffice. This is because we are able to split our income equally ourselves being self employed; we do not need to offset a higher wage against a lower wage. This accountant also suggested that we would be better off looking into a company structure, estate planning and adjusting the naming of our building licences and house titles to protect our asset base.Thanks for everyones replies and advice, it has been fantastic. Great that there is so much educated opinion out there.
Julie[thumbsup2]
Julie
I think you should have a company for your business for sure as this limits liability. But for property purchases, this is generally not recommended for lack of asset protection (the shares are an asset in your hands) and the lack of tax flexibility.
Terryw
Discover Home Loans
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Send an email to get my newsletter.Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Originally posted by Terryw:Julie
I think you should have a company for your business for sure as this limits liability. But for property purchases, this is generally not recommended for lack of asset protection (the shares are an asset in your hands) and the lack of tax flexibility.
Terryw
Discover Home Loans
[email protected]
Send an email to get my newsletter.Sorry, I probably didn’t explain that too well. The company will only be for our building business and short term buy/reno/sell purchases to avoid both our names on our contracts. Any long term buy and holds will be bought using a discretionary trust. There was a couple of other points he made which I have forgotten now (trying to get my BAS done) sorry Terry!![blush2]
Julie
Julie
Thats sounds ok then, thanks.
Terryw
Discover Home Loans
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Send an email to get my newsletter.Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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