Purchasing property – put in Trust or Personal?

Couple of points:

– Why are you considering the trust for this property? i.e what are you trying to achieve?

– You seem to be getting advice from a conveyancer on the assignment to the trust – what are the legal implications of this? You have signed in your name and are supplying the deposit….

– How is your trust structured?

– What are the succession issues?

– What happens if you lose capacity?

– land tax issues?

– If you pay the trust rent but the trust not claim any deductions (why do you think you cannot do this?) then the trust will have income and you will end up paying tax on the rent you pay to your trust.

– Any stamp duty implications on changing names before settlement? (which state?)

BTW, You can't be only beneficiary of the trust – or it wouldn't be a discretionary trust. You may be the only named beneficiary? You can also not have a trust with one person being the trustee and the sole beneficiary – there would be no trust. A trust is where B owns property for C.

So it seems tax is your main concern.

Accountants can only give tax advice. Assignement of a contract or recission etc is legal advice and you need to talk to a lawyer – not a conveyancer.

I don't know if your trust is valid. The internal structure of the trust is important. There could be some asset protection issues with the way you have set it up.

What do you mean appoint a successor? Who has this power? How is it exercised – have you done it yet – whether appointing a back up appointor by deed or by your will. There is a recent case involving a trust and an experienced lawyer who had himself appointed new appointor of a trust controlled by his dad. Dad later died and the appointment was invalid – someone else took control of the trust.

Sounds like you are manipulating the rent to break even – is this arms lenght? Why pay rent? Why not do it arms length and have the trust make a loss? Why do you think you cannot make a loss if living there? Do you have a private ruling? Whats the reasoning?

How does stamp duty in SA work? On the deposit? In NSW you pay stamp duty on the contract of sale.

Does duty result if you change names on the contract or if the person that settles the contract is different to the one who signs the contract?

I am a bit concerned you are using an accountant for advice, except for the rent issue all of this is legal advice.

If property 2 is owned by a trustee then you won’t get the CGT main residence exemption which you otherwise could. This is potentially a lot to give up.

Not sure of the land tax situation in SA – but you could have land tax issues in the future too.

I know nothing of your situation so can’t answer.

If you are only going to be there short term you may still be able to take advantage of your main residence absence provisions (s118-145) to keep it tax free after you move out for up to 6 years.

Limited information.

You seem to misunderstand trusts. Not as simple as you think maybe.

Hi nicki

Terry is pretty knowledgeable in tax, law, and estate planning. The only reason he cant give you specific advice on your situation is because he doesn't know your situation. The information you gave in your initial post is enough to give general advice. The specified advice you can ask for $200-300 a hour for a qualified person to sit down and go through your situation and the merits of buying both in your own name or buying a trust.

How much is the property worth? (Ie if it was a million dollar property) perhaps buying in your own name and not having issues of CGT for 6 years and no land tax would be beneficial

Distributing from trusts are not as powerful as they once were. To kids under 18 its less then $500 now before you start getting taxed at maximum rate. And you wouldn't have any 18 year old children yet so distributing to them isn't possible. Most likely if you had a spouse then they would also be working and you couldn't distribute to them anyway.  

You are selling property 1. I personally would buy this property 2 in my own name. because the CGT exemption is such a benefit, i personally believe it outweighs any tax advantages at this stage of your property portfolio.

It is still possible to add a martial partner to the title/deed later in life (without incurring stamp duty in sa)

Well it might be under land tax value currently. But in 20

Years time it might be well over taxable value, if the government don't increase the land tax threshold inline at least with inflation 

the 6 year rule means that if you lived in the property for 3 years as you said. Then moved out you would have 6 years Of being able to

claim the PPOR CGT exemption. If you moved back in to your house at 5 years and 11 months say for 1 year then the 6 year rule would begin again.  And you would get another 6 years. 

And what type of house you are buying also plays a factor in what structure you should put it in. Are you buying a new/recent property. Is there going to be depreciable quantities left in the home. A brand new home can have up to 10-12k depreciation in the first year.   Are you buying a home

which require some maintenance and renovations to occur. Are you buying just a average home ? 

Whats your profession like. Is there a chance of being sued personally ie a doctor. A doctor might choose to have a PPOR and all other assets in different structures to prevent them from being targeted  if any malpractice or accidents happened 

CGT still matters because it is a tax on inflation.

Even your dependents may inherit the property with your historical cost base and substantial underlying tax liability – AKA 'death taxes'. I seem to remember Terry trying to raise estate planning issues with you.

Present value does matter with capital appreciating assets.

What makes you think the 50% discount will remain … non-residents recently lost it.

Basically, the ATO's equity will be increasing along with yours or your trust's.

Streaming of capital gains through trusts is constantly being reviewed by government.

Terry is clearly concerned about your seeming lack of instruction from the solicitor that sold you the trust deed, and your reliance upon the conveyancer's legal advice which might trigger double stamp duty upon changing the names on the contract if done incorrectly.