[Anthony KParticipant@anthony-kJoin Date: 2010Post Count: 56]

March 7, 2011 - 11:34 pm

Hi SML and All
Definately no backdating . . .  ever,
Unless your are the PM or Treasurer or some other Pollie we cant re-invent the past
You must transition your affairs with complete transparency else you may find that it will cost you in the future.
I am waiting for RobG to come back as I am interested in his information, but
remember when and if you are subject to a CGT Event you do have offsets to reduce liabilities, my guess would be that your cost base calculations and your 50% personal discount will make any possible CGT pretty damn close to zero in a "few months" old business. Thats based on my 32 years in tax/business planning, although I have been wrong once before in 1982

Regards To All (even including RobG !)

[Anthony KParticipant@anthony-kJoin Date: 2010Post Count: 56]

March 7, 2011 - 10:28 pm

Hi Rob and All
Thanks for your contrary view, please substantiate ASAP,
Regards
Anthony

[Anthony KParticipant@anthony-kJoin Date: 2010Post Count: 56]

March 7, 2011 - 9:09 pm

Hi SML and All
Just a re-cap on the trading co and new DT.
First you appear to have begun trading in the current tax year ? If yes you can change now, BUT
First
it's not good to use an old company on a new trust as it might have attracted some financial dirt along the way a full service company wher you just place an order costs about $650 ($412 for the Govt Fee) so its cheap once off insurance,
2. There wont be any CGT because its all happend in < 12 months AND you did not commence with view to make the changes it just evolved. – CGT needs 2 elements,  Intention to make a gain and 2. > 12 months and 1 day duration,
Now theres not much point in trying to split $20K as the tax  rates wont make much differenece unless all the recipients,
either company shareholders or trust beneficiaries are on the top tax rate.
If its going to be worth doing do it right the first time by PLANNING what you do and then deciding HOW.
There are 4 D's in Tax Planning:
1. Deduct,
2. Divide (Income Split)
3. Defer (Pay later)
4. Discount (Dollar costs eroded by inflation or alternativly increased by investment/gain until payment is made)
A Good Plan uses them all together
You wont need 2 tax returns as you could get the activty moved to the trust, get a new ABN, GST, TFN for the trust and
Cancel all the old stuff.
You may ned to put in 2 returns for the first year depending on your results.
Happy Planning All
Anthony K

[Anthony KParticipant@anthony-kJoin Date: 2010Post Count: 56]

February 14, 2011 - 12:50 am

Hi All
This is a good place to see how others think and highlights how we are all different in how we think.
I have a couple of useful thoughts as follows:
It's generally held by these forums that debt is good AND bad.
Good is deductible interest, bad is non-deductible interest.
But in my view any expense is still a cost – "good" debt may cost a bit less but it still costs.
Capital outlays as in debt reduction are almost always after tax.
The only time you can generally reduce capital debt at a lower tax rate now is with a deductible sum such as super. contribution but it is a reduced tax cost not nil, and this strategy is complex for most people to achieve, or
if you pay off capital debt with a capital gain where the tax cost is reduced to a lower rate than usual..
So my belief is that – paying down debt is all good, it reduces stress, financial and personal.
It allows redraw in many IO and LOC loans. You can always pay down the loan to say $5,000 – $10,000 so you can extinguish it from your cash at bank or even from a CCard and you can re-finance without setup costs. So its always a safer position if your cash flows change.
Regards to All

[Anthony KParticipant@anthony-kJoin Date: 2010Post Count: 56]

February 13, 2011 - 1:39 am

Hi All
I hope you all noted the pearl of advice that Derek just gave you,
Its the bit about knowing your exit strategy ……… I see so many people trying to solve the problems that arise from divestment after the event. That is they have a big CGT bill and then ask "what should I do ?" when the coirrect question is how could I have planned my exit for a better outcome ?" but this is for next time.

So listen to Derek.

[Anthony KParticipant@anthony-kJoin Date: 2010Post Count: 56]

February 8, 2011 - 9:44 pm

Hi Luke, Terry and All
Yes
This is one of the strategies we use in our TEBL Trust arrangement.
Also please note that some people have been referring to "distributiing" or "transfer" of losses – it's not legal and its a breach of tax regulations.
In all cases – persons, companies and trusts, losses (revenue or capital) can only be used by the entity which generated them. There are also rules and test about continuity of ownership of the entity and continuity of the activity which generated the losses.
However you can distribute from one – trust1 to another trust2 if the recipient trust2 via its trustee is a beneficiary, or transfer if there is an obligation to repay a debt in which case it is not a distribution but a capital payment and will not reduce the income of trust 1. A business entity can also charge a management fee from one to another – bvut treat this with care as it must be able to be substantiated as to value and will also incur GST when it is invoiced.

Interesting stuff playing with business trusts

[Anthony KParticipant@anthony-kJoin Date: 2010Post Count: 56]

February 8, 2011 - 7:00 pm

Hi TerryW and All
You are right Terry however I use a special kind of trust which has compartments that can segregate assets used in a business.
This allows the trust to keep real estate apart from the trading activities. We use a specially designed trust and strategies with
high cash flow businesses like Child Care or hospitality related activities.
Ther is no extra land tax for discretionary trusts, they just dont egt the threshhold releif about $380,000 this year in NSW. The problem now is taht to get the threshhold in NSW you have to expose the holders of units in the trust to external creditors, its not an easy or a good choice. The govt. here is screwiing the public – as usual. You get the bad choice of having some better asset protection or saving some land tax.
Ah !! its a cruel world out there, take care all.
Anthony

[Anthony KParticipant@anthony-kJoin Date: 2010Post Count: 56]

February 8, 2011 - 1:00 am

Hello Gips & All
The gross return on your own business should exceed 25%,  + some Capital Gain, the return on property at best will gross say 5% – 7%  with little personal exertion if you engage an agent. Just work out your hourly rate of return from both and assess the opportunity cost and risk. Do you feel that you can expand the business by promotion or extra hours work or staying open ? Remember fixed costs such as rent do not usually limit your opening hours. Buying any property involves commitment and serious up front expences and is usually a 5-7 year investment, taking on debt and using at least some of you time.
Compare your business which can be changed without reference to many external factors, in my view you should make a careful fully researched and informed evaluation before taking any investment decision. The more care you spend planning the more likely you will be successful in the venture.

Regards to All
The secret of success is in the planning.

[Anthony KParticipant@anthony-kJoin Date: 2010Post Count: 56]

February 8, 2011 - 12:35 am

Hi TerryW and All,
Yes the 6 years CGT treatmewnt is correct.
Trustee duties can be found in 2 places, in the specific trust deed or any amendments and where that is silent or ambiguous. in the Trustee Act for each State or Territory.

There are provisions and rulings in the ATO legal database regarding rent and expenses and related persons or entities.
Trust losses can be reduced or avoided fairly easily by the way you set them up. Since each persons case wil vary so will the way the arrangements are established.

Never enter into any investment or arrangement unless you have a planned and documented startegy which will establish your intentions as to the results for which you are aiming.

Anthony @ A4Companies
 
This is great place for discussion – very worthwhile.

[Anthony KParticipant@anthony-kJoin Date: 2010Post Count: 56]

February 7, 2011 - 6:06 pm

Hi poweregg and All,

I have been working in this area for over15 years doing planning for investors, mostly business owners,

Q1. You can move out of your PPOR for up to 6 years without losing the CGT exemption, and provided you move back in for a while – say six months you can repeat that process without detriment,
In you current situation – rent free parental accomodation, you cannot claim any expenses as the "investment" has not beeen made to produce assessable income.

Q2
Is a bit more complex.
First – if the loan is repaid then you have no interest expenses – but you still have all the other items: maintenance & repairs, depreciation, or you may borrow to add a room or extend etc. but it is still an investment property. However the golden rule is still what is the purpose of the expense: IE is it  "an expense NECESSARILY INCURRED by the taxpayer,TO PRODUCE ASSESSABLE INCOME, if the answer is NO then no deductions will apply.
While you are all mulling over this very interesting idea go and read the case:Janmor Nominees Pty Ltd 87 ATC 4813.
This involved a SERVICE TRUST and was a case the ATO lost.
The other more iteresting case involves the ATO Ruling  ID 2002/388. This is an ATO Interpretive Determination issued in 2002, and says this: A SMSF can hold an investment interest in a unit trust which owns an investment property and the trustee of the unit trust can lease that property to member/s of the SMSF and provided they pay a full, arms length commercial rent to the trustee then all expenses are fully deductible. This is supported by the 1991 appeal case Forli Pty Ltd V ATO which the ATO also lost after declaring the relationship as a breach of super. laws.

However before you all get too excited understand that the SMSF and Unit Trust must have been linked < Aug 12 1999 so its now history. Also read the ATO "Agreessive Tax Planning Alert list which includes "Home Loan Unit Trust Arrangement" as the ATO has identified this as a NO GO area. The ATO Alert is not law – but unless you have the resources to fight a case it may bring you much anguish.

However given the great benefits involved it may be worth considering. Because Q? Does it mean that to because you get all the deductions – will you lose the PPOR benefits ? – No not necessarily because under the CGT PPOR exemptions it is not necessary to own a FREEHOLD interest in the property – it can arise from a LEASEHOLD entitlement.

Detailed personal property planning – before you buy can bring much greater benefit and certainty than just listeneing to "property gurus".

All contributions to debate in this area are invited.
Regards to All

Anthony @ A4Companies

[Anthony KParticipant@anthony-kJoin Date: 2010Post Count: 56]

February 1, 2011 - 12:55 pm

Hi MelbGuru & All
Must toss in my 10 cents.
First of all CRJ is correct,
NO CGT as the land is trading stock for a developer, However if you decide to hold the profit in the last one or several properties as an investment rather than buying a separate property – you can rent them out and gear them to provide any cash you might need. This way you benefit from holding the savings on development (the profit on build), you save stamp duty and commissions on any new purchase. And if you hold them for > 5 years you save the GST.
BUT, dont do it in a company as your lose the 50% CGT discount – do it in a unit trust or perhaps a SMSF or maybe both but be aware  –   for a SMSF – vacant land and the LVR's are more challenging for finance.
Remember – Its all in the planning . . . .  Make sure you can see your exit clearly and in detail before you enter !.
Good Luck

Anthony @ A4Companies

[Anthony KParticipant@anthony-kJoin Date: 2010Post Count: 56]

February 1, 2011 - 12:35 pm

Hi Babee & All
This needs some care,
Except for possible subdivision its probly better for you to lend to your parents under a written agreement which gives you the right to register a caveat over the property as there are some variables.
Suppose selling the investments timing doesnt fit in 2 years,  or  their plans change thro illness or whatever, then you are stuck  ?
or the subdivision is not approved ?
however if you lend to them under the agreement then that could include involvement in the subdivision at the time it gets approved.
Either way under the agreement you can share in the equity,
Sounds like a job for a solicitor to me.

Anthony @ A4Companies

[Anthony KParticipant@anthony-kJoin Date: 2010Post Count: 56]

February 1, 2011 - 12:15 pm

Hi Lesley & All
Just remember you can leave your PPOR for up to six years and rent it out without loss of CGT freedom, then your loan interest becomes deductible and you have other tax offsets.
Basic weekly cash flow will be similar as your rent in equals rent out if both properties are similar You can make application for PAYG tax variation to reduce outlay monthly and use those tax benefits to reduce your loan faster.
AFter you do the cash flow numbers it comes down to personal lifestyle prefs.
Happy planning

Anthony @ A4Companies

[Anthony KParticipant@anthony-kJoin Date: 2010Post Count: 56]

January 31, 2011 - 11:11 pm

Hi Josh
I have been working on a project for people in your position for almost 3 years and have done heaps of research during that time.
My results tell me this:
1. Buying an investment property before a home is paramount, Why ?
Simply because the Govt. support is much larger by a country mile and that support is for all years you own the property not just a first year benefit. These subsidies usually allow you to finance the deal for less than $100 per week.
2. It also tells me that to buy a $500K property you need to use a structured approach via a special fixed trust, Add formal family loans and pay those off before the main loan (IO finance).
3. This leaves you with a hard track to run on for about 2 -3 years and after that you can ease off.
4.One of the best ways to own a home is to buy an IP first and use the equity growth by re-finanancing the trust to give you back capital to use for a home deposit.
Then the rental income flow subsidises your loan interest in the trust.
5. Because the IP is not in your name you can later arrange for your super. fund to ultimatel own the property.
There are many variations possible – this is the basics.
My next ittem will be about :- "The First Nine Years" (of your home or IP  mortgage).
Watch this space.
Regards to all would-be IP and home owners.
Anthony K

[Anthony KParticipant@anthony-kJoin Date: 2010Post Count: 56]

March 31, 2010 - 1:33 am

Hi kwjegates and All,
I see you have all your eggs in the personal basket.
Its very common and in fact I think its the most common – but not in my view ideal.
There are 2 issues regardless of your exact circumstances:
1. All your assets are exposed to personal liabilities, and a problem with either property impacts on all of them
2 If you ever wanted to – you cant ever put them into a SMSF,
As to advisors – my advice is get ideas from 2 or 3, its their job to be able to demonstrate and convince you of  the value of what they promote.
If they cant do that keep going as are if you are happy with it.
Regards
AK

[Anthony KParticipant@anthony-kJoin Date: 2010Post Count: 56]

March 31, 2010 - 1:22 am

Hi Wattp,
I see you already had some feedback, just one small thing – if you have a SMSF (if not you could get one),. then you could get the fund to buy out the other 2 partners and you can keep your friends. I would rather have 2 friends than a bill and a lawyer ).
Or you could get the SMSF to take over all of it, in both cases you could have the SMSF borrow some cash, either way you have legals and stamp duties to pay.
Regards
AK