We have 2 IP properties which are currently owned in one partner's name and we would like to place them in our Discretionary Property Trust. I understand this can be done but not sure the best way to go about doing this.
The reason we'd like to include them in the Trust is to build our Trust equity base for further borrowings as both properties have considerable equity which could be accessed and we would like to dispurse dividends appropriately between trustees.
Both properties are currently financed so would require refinancing. Transfer of title to the Trust would tale place at that time? Would this involve CGT & Stamp Duty? Is this considered a loan to the Trust?
Lastly. Can we, at some point in the future, pay the trustees for this 'loan'? How would we do that?
Generally this is a very expensive option because of the CGT & stamp duty implications – consult your accountant beforehand. It is more effective to sell the properties and to buy new ones inside the trust
Thanks IP .. I'll do that
Desertchik wrote:We have 2 IP properties which are currently owned in one partner's name and we would like to place them in our Discretionary Property Trust. I understand this can be done but not sure the best way to go about doing this.The reason we'd like to include them in the Trust is to build our Trust equity base for further borrowings as both properties have considerable equity which could be accessed and we would like to dispurse dividends appropriately between trustees.
Both properties are currently financed so would require refinancing. Transfer of title to the Trust would tale place at that time? Would this involve CGT & Stamp Duty? Is this considered a loan to the Trust?
Lastly. Can we, at some point in the future, pay the trustees for this 'loan'? How would we do that?
Hi
Sounds like you want to release equity from the investment properties????
To transfer existing properties into a trust it is basically the same as selling them to the trust. So you will have all the costs associated with a sale and all the costs associated with a purchase – except maybe real estate agent commissions. GCT will apply (if there was any gain!). Loans will need to be paid out and re-applied for. Stamp duty etc.
It still maybe worth while. You probably shouldn't do both properties in the same financial year as you may end up paying more tax.
You mention dividends – but trusts don't have dividends. Trusts have distributions – and these don't have to go to the trustees, but to the beneficiaries – usually at the discretion of the trustee, which means lowest taxed usually receive first.
You would need a conveyancer – better a solicitor -to do the transfer. Stamp duty would be payable then, but CGT would be when you do your tax return for that year. You could lend money to the trust to pay for stamp duty, but the CGT is yours! You should see a good accountant about the tax aspects. And your lawyer should tell you about the asset protection aspects.
Not sure what you mean about paying trustees. But if you mean can the trustees receive payment for acting then the answer is yes – if the deed permits it, but this would be income to them. If you mean can the trust payback the trustees for the money borrowed to pay stamp duty and deposit etc, then yes – you should have a loan agreement drawn up for this.
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
Thanks Terry .. I've clearly got my dividents & beneficiary tags mixed up but you got my intention so thank you for working through with it .. and answering my questions.
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