Advice needed on structure issues

Unfortunately your accountant is right.

You've got a wide selection of properties all with a reasonable appreciation and however .. a large valuation as well. This means really that anything you purchase will be additional to the current assessment and therefore increase your land tax burden.

Its not an unusual problem to have. The only thing i can think of is to accept the fact you'll be paying the land tax based on the current level of properties you have .. factor the increase in land tax into any future equations you wish to purchase and .. live with it.

The real thing is the fact that all the properties exist under a single set of names for ownership. As there is no real benefit in paying to shuttle properties across to trusts, what you are left with is utilising what seems like a large growth of equity to fund future purchases in a better structure. Thats possible. And if your parents are earning reasonably well they should be looking at some format of tax minimisation through property anyway. Even with a larger property base.

The only real way you can minimise on land tax is to purchase structures with a low taxable base land value .. such as a multi-division .. like a unit complex. Site value is then divided by the number of properties on the land .. significantly lowering your assesable land value. Again .. its also accumulative .. so multiples will eventually promote you to a higher land tax bracket. But it starts from a lower base .. so it just takes longer to happen.

I also cant see why you are getting nervous about CGT. If you have to pay it .. you pay it. You'll be entitled to the 50% deduction for holding over a year .. and if you only sell one item a year .. you can offset that against existing expenses .. or deductions to minimise your tax burden.

Sum it up nicely .. the only way to avoid land tax is to distribute it, the only way to avoid CGT is to offset it. And for future efforts you should always assess where the property will be going to start with. If purchased under a holding company you give yourself more flexibility on ownership but you lose on the advantages you have by purchasing as sole owner as you catapult yourself into the company rates of tax which are higher.

One option is to transfer a couple of them into a SMSF(Self-Managed Super Fund)…..  you would of course need to do the numbers to see if it was worth it.  The transfer would trigger a CGT event and also require a stamp duty payment due to change of ownership.  One in the SMSF the income would be tax-free at retirement, and taxed at 15% until that time.  Check the relevant state revenue pages for information on how land tax would be handled within a SMSF.

@ Anthony K

What’s the current annual limit to contribute to super?

Swampy

Hi Swampy & All
New reduced contribution limit for 2011/12 tax year is now $25,000 for concessional (deductible) and $150,000 for non-conceesional(non deductible). The government has announced changes that, if passed by parliament, will permanently increase the concessional contributions cap to $50,000 for individuals who have total super balances below $500,000 and are 50 years old or over. Its not like the good old days any more when you could put in $100K at age 49+.
There is still the back door method using borrowing and leverage to increase the invetsment input, provided there is sufficient cash flow to manage the interest cost. Also there are options if you can amalgamate two SMSF and add an unrelated third party so that the SMSF dont have more that 49% control. The 3 parties can then use a geared unit trust to invest jointly, but this sort of strategy is not for older persons with limited financial muscle and shorter term time to retirement.  The old pr 1999 unit trusts were always the best vehicles when you could put a business in the UT and guide all the profit into the UT. After 2009 it now requires a re-structure for them to be able to function like they did pre 2009 times. These old structurers can still movce around all the caps if used correctly.
Regards
Anthony K @ A4Companies

Hi JacM & All
Yes JacM but if the parents can qualify to make super. contributions, they could proceed like this.
They  have equity in the properties so they could sell some equity to the kids who can borrow and use parents property as security, It needs to be set up properly on an arms length basis. The kids can deduct the interest and the parents can use the cash to make either or both deductible and non deductible super. contributions and buy new properties in the SMSF using some super. gearing. All parties get benefits this way and risk can be minimised if it is properly planned and documented.

Also a correction when I said: "The old pr 1999 unit trusts were always the best vehicles when you could put a business in the UT and guide all the profit into the UT." there were 2 typos.

It should have said: The old PRE 1999 unit trusts were always the best vehicles when you could put a business in the UT and guide all the EXCESS profit into the SMSF."
Regards to All.
Anthony K