Hi guys,
We're onto our 5th property now and starting to think about how we can proceed going forward.
Our plan is to buy up to 20 residential properties as part of our future nest egg and all is going well so far. We've found some great deals that are either cash flow neutral for the time being or slightly positive. We have one that is negative by $20 a week after all expenses.
Our concern is the following:
Land tax if we break the land tax threshold. We are in QLD and 3 of our houses are here. We have 2 in NSW.
the other is
Exposure and vulnerability to possible legalities. These investments are in our personal names. My wife is a doctor and I am a small business owner so there are possibilities of becoming targets should something go wrong within our professions. Also if a tenant got nasty and tried to sue over something trivial or and real case where it may be warranted.
We are fully insured professionally as well as in regards to the properties, but its not solid from what I understand.
I have heard the term trust waived about a lot but don't know much about it. I have heard it can be used as a vehicle to hold assets and separate them from you personally.
I have also been told that moving property into a trust vehicle does remove any possibility to use the property as a tax benefit.
The trust could help us avoid the land tax issue but then wash out any tax advantage.
Can anyone share some insight or thoughts on this topic? It would be much appreciated.
Thanks in advance.
In QLD the land tax threshold for each and every Trust is $350,000. So they do not add to either your individual threshold or the thresholds of your other trusts. This can provide a significant saving in QLD.
However, in NSW a family trust has no threshold, but a fixed unit trust does.
Discretionary trusts provide separation and your interest in one is not an asset that can be claimed by your personal creditors.
If you have leases and trade creditors where you are required to give personal guarantees and you would not be able to meet these obligations if your business went under, then I would consider you at greater risk of losing assets than your doctor wife. Unless she has her own practice and has the same issues.
Lack of access to negative gearing can be an issue. However, if your business was set up in a trust, then it could distribute income to your negatively geared property trust and would achieve the same outcome.
RPI | Certus Legal Group / PRO Town Planners
http://www.certuslegal.com.au
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