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Should a property be bought under a company name for investment?wes2008 [7 Posts] Hi, I have my own company that generate regular income, which is registered as pty ltd. I have been thinking of buying an investment property and would like to buy more in the future. I am not sure whether I should use my own company to buy the property or buy it under my own personal name. In regards to tax deduction benefit, loan finance, limitation, any advice on which is the best path? Pros and Cons? Thank you in advance. Cheers, Tysonboss1 [296 Posts]  No you should not buy under your company name, 1. If you do any capital gain under a company structure will not get the 50% capital gains tax discount as you would if you held it in a trust, or your own name. 2. any property that is held under the company name will have no protection if any other business held by that company go belly up and creditors go looking for assets to seize, the main reason you buy or build a business under a company name is to protect your other assets right, so why place a property under the company name where it is not protected. **********************************************************   blueheeler [46 Posts] The Boss is absolutely right, set up a trust "property investment trust" with 1.Asset Protection Unlike most trust you can claim tax deductions "negative gearing" But before you jump into something like this, seek help from an accountant who knows all about trust. Good luck. Terryw [6279 Posts]  I also would suggest it is not wise to buy an appreciating asset in a company as you lose the 50% CGT reduction for assets held over 12 months - which could cap your tax at half of the top marginal rate of 46%. 23% is less than the company rate of 30%. And you certainly should not buy in the same company you trade with. Businesses are often sued, and this will place the properties at risk. I would look at trusts, probably in your situation a discretionary trust. Losses cannot be offset against no trust income, but being self employed, you may be able to structure it so your company profits can flow into the same trust offsetting losses. Blueheeler, losses cannot be be claimed by a beneficary. Unit holders may be able to claim a loss by borrowing to buy the units, but to enable this to happen there seems to be too many restrictions required for the ATO to accept it. Terryw blueheeler [46 Posts] I also would suggest it is not wise to buy an appreciating asset in a company as you lose the 50% CGT reduction for assets held over 12 months - which could cap your tax at half of the top marginal rate of 46%. 23% is less than the company rate of 30%. And you certainly should not buy in the same company you trade with. Businesses are often sued, and this will place the properties at risk. I would look at trusts, probably in your situation a discretionary trust. Losses cannot be offset against no trust income, but being self employed, you may be able to structure it so your company profits can flow into the same trust offsetting losses. Blueheeler, losses cannot be be claimed by a beneficary. Unit holders may be able to claim a loss by borrowing to buy the units, but to enable this to happen there seems to be too many restrictions required for the ATO to accept it. Terryw A property investment trust exist and you can offset against your property, this trust is the only one. Check with the ATO. This trust is new to the system and it is legal. Just trying to point out the facts about trust, sorry if I've offended you in any way, it wasn't intentional. Terryw [6279 Posts] Hi Blueheeler, If you are talking about the Chan and Naylor one, then I think this is a hybrid trust with a few modifications. Losses for these still cannot be distributed. It works like a normal hybrid trust - interest is claimed by the unit holder and the trust therefore makes a profit which can offset other costs such as depreciation, council rates etc. This trust has been out a few years already, but I am not sure if there are any private rulings regarding this - this would be the only way to check with the ATO its viability. Terryw blueheeler [46 Posts] Hi Terry, its a property investment trust, not hybrid. Yeah, totally agree, firstly confirm with the ATO. Terryw [6279 Posts] Hi Blueheeler I think these PITs are jsut hybrid trusts. ie a discretionary component and a unit component in the same trust. Terryw Terryw [6279 Posts] blueheeler wrote:
You are absolutely right, the only dif is the land tax concession. Chan Naylor also claim their trusts are able to last more than 80 years. Terryw wes2008 [7 Posts] I am looking at setting up a "Property Investor Trust", I heard that this trust the Losses are claimable by beneficiary. If you place yourself as beneficiary, does that mean you can offset the losses against your personal income? Anyone set up this trust before, can share some light? Thank you. albatross [1 Posts] Hi TerryW and BlueHeeler buyproperty [23 Posts] Property investment is considered a lucrative business option. More and more people are buying investment property in order to earn revenues continuously. With property value rising over time, your investment will help attain capital growth. |
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