Buying using a Trust Structure

Hiya

I wouldn’t say purchasing under a trust is the norm – in fact, I’m seeing less and less of it these days.

It has its pros/cons and is something you should speak to your accountant about before deciding as it will be dependent on your individual circumstances.

Cheers

Jamie

There are a number of reasons why you would consider buying or not buying in Trust and these will depend on your personal circumstances and longer term goals.

As far as financing a deal in Trust many lenders will have no issue and offer the same rate / application charges etc as they would if you were buying in your own personal name whilst others will treat it as business purchase and limit the discounts.

Your Broker should be able to guide you thru the maze.

Cheers

Yours in Finance

Buying real property as a trustee is often a mistake, especially in NSW because of land tax. 1.6% of land value in tax per year for a property can be a killer.

e.g $400,0000 land value = Nil tax in your own name (assuming your first property) but $8000 per year in land tax every year. That is a huge difference.

Add in the fact that a trust is treat as a separate tax entity so any losses cannot be used to offer your personal income could mean another $2k to $5k pa to hold in the early years.

Setting up a cheap online trust can also cost you more, much more because of errors, wrong terms, wrong party in the wrong place etc.

This is why you need legal advice.

Not true.

Hybrid and Unit trusts also don’t necessarily offer you asset protection because the Units issued can be considered an asset.

Has anyone had any experience with the Property Investor Trust?

Cheers

Andrew

superAndrew wrote:

Hybrid and Unit trusts also don’t necessarily offer you asset protection because the Units issued can be considered an asset.

Has anyone had any experience with the Property Investor Trust?

Cheers

Andrew

Experience no. Have not seen it tested in Court as yet, and would need to before I would advise my clients to use.

In QLD most of the developers that we deal with use discretionary trusts if they are involved with any one outside of their family. Unit trusts are the most common for non related parties, then companies and then own names.

Investors we would have mostly own names, then discretionary trusts. In the conveyancing practice we would settle a couple of discretionary trust purchases a day, and a couple of unit trusts a week. SMSF purchases are actually outnumbering the unit trust purchases at present.

We were using a partitioning structure for development among partners but are awaiting the outcome of a court case (none of my clients) that if it goes one way could be bad for this structure.

We have now developed (in conjunction with a top tax law barrister) an alternative structure utilising a number of bare trusts which allows non related parties some beneficial treatments in development. It is not cheap and requires a private binding ruling but save more in tax then it costs.