I just graduate from university and I am thinking to feasibility to buy a house together with several friends due to the financial capability. We have been thinking the options of company, trust and partnership. I am not sure which form is better to use, and what are the tax implications of each option.
Hope someone can give some general ideas about it.
Kind regards
Willaim
The information you have provided alone is insufficient to determine the best structure to use, and based on what you are seeking to accomplish it might be best to consult both a lawyer and an accountant.
Amongst one of the most important pieces of information required to determine the best structure to use, is what you aim to achieve from purchasing the property. Will this be a property that you buy, renovate and sell for a quick profit? Or will it be more of a long term buy and hold property? Will it be positively geared, or negatively geared? etc
In general trusts offer the most flexibility out of all the other structures, but it would be best for you and your friends to discuss this with an accountant.
Consider
– death
– divorce
– bankruptucy
– withdrawing from the investment
– stamp duty
– borrowing ability
– guarantees
– effect on future borrowings for individuals
– land tax
– cgt
Probably the most flexible structure is a unit trust with a corporate trustee. But the structure within the structure would depend on your situation.
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
Thank you very much for the information and they are very useful. I am new to the real estate field and I really appreciate the help that you provided.
Thanks
William
Terryw wrote:Consider– death
– divorce
– bankruptucy
– withdrawing from the investment
– stamp duty
– borrowing ability
– guarantees
– effect on future borrowings for individuals
– land tax
– cgt
Probably the most flexible structure is a unit trust with a corporate trustee. But the structure within the structure would depend on your situation.
I want to do something similiar to op but with 10 people and my fear is someone getting divorced.What sort of trust if any is divorce proof.lol.
JimmySprinkles wrote:Terryw wrote:Consider– death
– divorce
– bankruptucy
– withdrawing from the investment
– stamp duty
– borrowing ability
– guarantees
– effect on future borrowings for individuals
– land tax
– cgt
Probably the most flexible structure is a unit trust with a corporate trustee. But the structure within the structure would depend on your situation.
I want to do something similiar to op but with 10 people and my fear is someone getting divorced.What sort of trust if any is divorce proof.lol.
No trust is divorce proof. A company may be safer as shareholder don't have the ability to lodge caveats over company property. A family law dispute could result in some sort of charge over the shares, but not the property of the company – depending.
You need to consider the Coprorations Act rules regarding managed investments too.
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 very much Terryw.At a guess If we had ten guys all on around 60 thousand gross per year,would a company opened up with the same ten names have much income tax return issues or implications on there personal tax returns.Thanks heaps.
JimmySprinkles wrote:Thanks very much Terryw.At a guess If we had ten guys all on around 60 thousand gross per year,would a company opened up with the same ten names have much income tax return issues or implications on there personal tax returns.Thanks heaps.
Heaps of issues but income tax probably won't be much of an issue.
Does this breach the Corporations Act managed investments without a prospectus?
How many directors?
How many shareholders?
Who would be shareholders?
CGT 50% discount
Loans – who guarantees?
death – what if one shareholder dies?
bankruptcy – shares fall into hands of creditors.
Divorce – shares fall into the hands of a spouse, family court orders over company etc
shareholder's agreement for various issues
injecting money – loan or equity?
etc etc
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
Im fine with most of the situations you state.What is it you talk about the 50% CGT discount..
JimmySprinkles wrote:Im fine with most of the situations you state.What is it you talk about the 50% CGT discount..
Company pay a flat rate of 30% tax. Individuals get a 50% discount on capital gains for assets held longer than 12 months so would pay a max of 24% CGT.
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
Whilst nothing is seemingly divorce proof,would you say that individual or company have the same divorce implications or are they different.
JimmySprinkles wrote:Whilst nothing is seemingly divorce proof,would you say that individual or company have the same divorce implications or are they different.
Different
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
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