Hi,
Can anyone explain what the differences are if you buy a property through a trust or a company? The company (hypothetically) being one I have setup for my investing needs. I'm ideally looking for advantages/disadvantages, plus an idea of the initial costs of setting up both.
Thanks
Mikemikeking wrote:Hi,Can anyone explain what the differences are if you buy a property through a trust or a company? The company (hypothetically) being one I have setup for my investing needs. I'm ideally looking for advantages/disadvantages, plus an idea of the initial costs of setting up both.
Thanks
MikeA trust and a company are two very different things ,
A company is a separate on going legal entity where as a trust is not really a legal entity it is just a form of holding an asset in trust for the benefieries.
When you set up a company, the company is a new legal entity that can buy and hold assets, have bank accounts and take out loans and is subject to different tax obligations than a human, a company does not die there are companies in australia that are well over 150 years old.
A trust however is not really a separte legal entity as a company is, A trust is just the name given when one legal entity ( wheather that be a human or a company ) holds an asset for someone else. Trusts are also normally set to expire after a certain time frame such as 80 years they are not ongoing like a company.
when deciding the structure you wish to hold assets in you really need to examine the reasons you wish to do it and think of the benefits each structure will provide.
Mike King
You will be looking at $720.00 if you want to buy a shelf company yourself. You can do that on the net but I would recomend talking with a solicitor and or an accountant (talk to as many as you need until you find one you like) about the correct structure for you.
A solicitors professional fees to set up a company and discretionary trust vary. I paid $800 in professional fees but I'd rather pay the money and know it's done correctly.
Then you'll need get your acountant to organise a TFN and ABN. Cost of roughly $100 each.
You should have plenty of change out of $2k. Use that to buy a dirty big filing cabinet.
Just be sure you're clear about your intentions from the outset as it can be costly to transfer property from entity to entity at a later date.
Good luck.
Gav.
Gav
If you paid your Accountant $100 each for setting up your TFN and ABN then you have money to burn as you can do it online on the ATO website in about 20 minutes for nothing.
Also $800 in Professional fees is exhorbitant as a good property Accountant will charge you around $1200 for the shelf company, Trust inclusive of their fees. TFN / ABN & GST registration will be thrown in for nothing.
Richard Taylor | Australia's leading private lender
Hi Richard,
On that note, can you refer a good property accountant?
Cheers
MikeRichard.
I knew i joined this site for good reason.
Looking at setting up a new trust/company so you have just saved me quite a few hundred dollars. Thank you!!
Gav.
Hi all,
what are the tax implications though? If you purchase a property through a company you dont get any capital gain discounts do you? Plus you can distribute income without being subject to 30% company tax. Is this correct?
Cheers
Benhmmm…. so the $2100 I paid to have my trust set up with corporate trustee was at the expensive end?
Bugger!!!!
I am setting up a DT and it will cost me about $250. I also set up a company for $900.
Cheers
Bentammy wrote:hmmm…. so the $2100 I paid to have my trust set up with corporate trustee was at the expensive end?Bugger!!!!
Well, as long as it wasn't as expensive as not having set it up then no.
There are big differences in holding an asset through a company or a trust. Generally, it is recommended to hold growth assets in a discretionary trust as you can still access the 50% CGT discount. So the max CGT you would pay if using a trust would be 24.25% verse 30% if you held in a company.
Other benefits of a trust include the streaming benefits of distributing incomes to the lowest income earners – and to a company at the last resort.
Asset protection is another important issue. Shares in a company are an asset so if you own them individually, they would be at risk if you are sued. Whereas an interest in a trust is not an asset as the trustee has discretion on whether they give you the income or not – if you went bankrupt, for example, the trustee would not distribute to you (otherwise it would go to your creditors).
Secrecy is another aspect. if you are part of a company (shareholder, director etc) your private details are publically searchable. if you are a beneficiary of a trust, generally no one will no. But the Trustee's name will still be registered with the land titles (not their DOB, Place of birth etc).
Forming a company costs $400 for the ASIC fees. If you went in there and filled in some forms this is all it would cost you. There are other online services which cost $99 + ASIC fees (www.lawcentral.com.au).
Trusts are a bit more complex to set up and you should probably use a professional to do it.
ABNs and TFNs etc can be easily done by yourself
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
Another option would be to set up a trust only and have yourself as the trustee. It's cheaper short term to get started and will get the ball rolling. You can still disburse funds to the lowest wage earner so the tax benifits are still there if you want to sell or the property is positively geared.
All going well and as the portfolio grows, you can form your company and appoint the company as the trustee. Effectively this is the best way to 'remove' yourself from the assets. You would be the director of the company. Control everything and 'own' nothing.
I was quoted $600 for setting up the trust through an accountant; I'm sure someone out there knows how to get it set up for less.
I have two properties in my own name and have recently set up a trading trust, trustee company and trading company to conduct business through. The trust owns the business' and any future property will be purchased by the trust. The trustee company has licenced our trading company to operate under the business names and use assets within the business'.
It was slightly expensive to set up but we only have to do it once. If you're not going to conduct business then this structure isn't neccassery.
Good luck,
Gav
Is it true if your property is set up as a company and you decide to sell the property and make a profit what % amount will you have to pay for CGT.
Also if you wanted to transfer your company to some ones name you will have to pay stamp duty on the house again is this also true?
Jpcashflow | JP Financial Group
http://www.jpfinancialgroup.com.au
Email Me | Phone MeYour first port of call in finance :)
True and true. have a look at https://www.propertyinvesting.com/forums/getting-technical/finance/4323604#comment-168079
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