hi everyone;
I have read a large amount of post and information on trusts and businesses.
however I am yet to find a solution to my current situation.
I am in the high income bracket;
I have several IPs in my name, 1 IP with my partner.(50/50 tenants in common)
My mortgages are all with separate lenders and properties are not cross collaterised.
I have an offset a/c against one mortgage in which all income goes into
a Line of credit a/c which all investment cost come out of (mortgage payments, rates etc…)
I am heavily negatively geared, but not beyond my means, and I am still saving money in the bank.
I am looking at branching out into property development; starting with small subdivisions (max of 3-4 unit sites)
The first issue I have is setting up the best account structure for my scenario;
Do I set up a trust with a company as a beneficiary, or go in my own name?
If so would moving my current IPs into the trust be wise, or leave them in my own name?
Will they be separate from any property development I do that may go wrong and thereby protected from litigation?
Second part is the property development;
How do other people structure their accounts?
How does this affect, income TAX (PAYE), GST, CGT etc…
I have attempted to discuss with my accountant, but I think it is getting too complicated for where his expertise is at;
any advice would be appreciated;
Cheers
Ritchie
You should seek advice on using the LOC to pay for loan repayments. What is your purpose in doing this? ATO can apply Part IVA and deny your deductions.
For a development it would be a good idea to use a separate structure such as a discretionary trust with a corporate trustee (not beneficiary, but could be that too).
But the trouble with your set up is that all your assets will be exposed by the need to give a personal guarantee. If the trust is sued then having a company as trustee will assist you protect you other assets, but if the development fails the bank can come after all your assets.
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
Hi Terry,
The LOC was set up to have a clear separate investment transactions account, and not to be mixed with personal spending.
Also a buffer for when I am not able to keep a close eye on the balance, as I am often away.
As I have reached a point where I am assessing my current structure with the mind set of becoming a property developer.
I have no issue with paying TAX, I am just making sure I have the account structure setup correctly from the start.
Cheers Ritchie
Ritchie,
You should seek some professional advice on that set up.
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
Away from the issues that Terry has mentioned have you considered how you will finance the development.
Not a standard residential deal for most lenders so will take a little more massaging through.
Almost going to require a higher deposit lower lvr and potentially going to have to show you can service the entire debt without taking into consideration the potential rental income.
If you can keep it to 3 units on single title going to be a lot easier to finance..
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Cheers 007,
I have started to put together a good team,
I have a very good finance broker who is the process of establishing finance.
However, before I wish to proceed I want to ensure the account / business structure is correct
One thing I am trying to learn more about is the Trust Deed, and any terms I should or should not include
Cheers
Ritchie
Terms of the trust deed can only be done by a lawyer. These will depend on your siutation and what you are trying to achieve.
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
How is your Broker in the process of establishing finance if you haven't decided what structure to use ?
Seems a wee bit arse about face to me.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
He has provided me with some borrowing options with my current structure, and is able to assist with borrowing through a Trust if required
Moreover, now that I am looking at the next step up, my basic understanding is I need to structure to protect myself, and my assets better than my current setup.
So here I am.
I'm fast coming to the conclusion that Terry pointed out to engage a lawyer to get more information and set up a trust (of which type I'm still not entirely sure, and a business as a corporate trustee)
Cheers
Ritchie
You must be logged in to reply to this topic. If you don't have an account, you can register here.
