All Topics / Finance / To trust or not to trust?

Viewing 6 posts - 1 through 6 (of 6 total)
  • Profile photo of JimmyJJimmyJ
    Member
    @jimmyj
    Join Date: 2007
    Post Count: 49
    March 27, 2009 - 11:26 pm

    Hi,

    Trying to get some direction regarding financial structure before purchasing an IP.

    My situation:

    My partner and I are in a defacto relationship and not married.

    Me, I am in the 40% tax bracket, and I have a PPOR with approximately $110k in equity, however no investment assets and getting hit with a large income tax bill.

    My partner, she is in the 30% tax bracket, and has 1 IP which is 100% in her name, with approximately $60k in equity.

    Hoping to purchase another IP (cashflow neutral by utilising negative gearing i.e. deductions, etc) around the 300k mark which should assist to reduce my income tax bill.

    Accountant suggested purchasing either with hybrid trust, OR in individual names, i.e. tenants in common (99% / 1%).  Trying to determine which way is best way to go.

    Any suggestions?

    Will I have issues obtaining finance with either of these structures?

    Thanks.

    Profile photo of MrleumyMrleumy
    Member
    @mrleumy
    Join Date: 2008
    Post Count: 13
    March 28, 2009 - 12:06 am

    Can I suggest taking a look at other threads on here in relation to your questions.  In fact, I think there is another thread which has a similar title.  There is loads of information on here and I think you questions may already be answered.

    Profile photo of lifeXlifeX
    Member
    @lifex
    Join Date: 2004
    Post Count: 651
    March 28, 2009 - 11:56 am

    I'd be very wary of using a hybrid trust as the ATO has recently clamped down on these.

       Surprised your accountant still recommends it with all the limitations the ATO are putting on  them,

       If it is cashflow neutral, I'd say you dont need a hybrid structure. Just set up an ordinary discretionary trust and have a corporate trustee if you want extra protection..
      

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024
    March 28, 2009 - 9:20 pm

    There are still 1 or 2 lenders who will accept HDT structures but they are a dying breed.

    Just dont get caught and find that you are boxed into a corner because they put the rate of interest up and you cant refinance elsewhere as you have no choice.

    Richard Taylor | Australia's leading private lender

    Profile photo of danielleedaniellee
    Member
    @daniellee
    Join Date: 2006
    Post Count: 197
    March 31, 2009 - 2:06 am

    Hi, JimmyJ

    This link might help. I started it because I had similar questions as you.

    https://www.propertyinvesting.com/forums/getting-technical/legal-accounting/4326640?highlight=to%2Ctrust%2Cor%2Cnot%2Cto%2Ctrust

    Regards
    Daniel

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    April 1, 2009 - 9:47 am

    If your accountant is recomending hybrid trusts then be careful. They may not have a good understanding of taxation.

    Purchasing in your own names or doing 99/1 will save you a little bit of tax now but may create a tax time bomb. What happens when your property starts making a profit? = you will be paying more tax than you otherwise would. Turning into positive cashflow will be quick in this environment.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

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