[nicki_Member@nicki_Join Date: 2013Post Count: 12]

September 30, 2013 - 9:15 am

Thanks Terry, good summary. I'm meeting a Lawyer tomorrow whom I trust (no pun intended!) and has actually helped me before with some property matters. He had a chat with me over the phone and understands all the issues. Wish I saw him before setting up the trust but I trusted the accountant I sought advice from whom arranged the creation of the trust for me.

Anyway now I have some good issues to raise tomorrow.

I also started to think about the SMSF as well as a possible option, if I am keeping this perpetually.

p.s. he did confirm it is ok to transfer the interest in the contract to the trust and only pay stamp duty on the deposit ($100).

[nicki_Member@nicki_Join Date: 2013Post Count: 12]

September 29, 2013 - 8:43 pm

Rob G. wrote:

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.

Please all, there is no need for condescending. If you don't have anything helpful to write don't bother. It doesn't make you look smart thread crapping and being rude to someone who is just here for some helpful suggestions.

Rob, you don't need to 'seem to remember' anything, it is all here in writing. You can scroll up if that helps you remember.

I repeat again, I plan on keeping this as an investment indefinitely. CGT will apply either way eventually if sold as when it is sold something else will be my PPOR. My dependents would pay CGT in either scenario if they sold it.

I repeat, I plan to see another Lawyer. I will not be transferring the property if it means paying stamp duty twice. I repeat I understand succession planning.

"What makes you think the 50% discount will remain" not sure what the point is of this condescending hypothetical. You could say the same for the PPOR 6 year rule in section 118.145 in the act for example.

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

How about we talk about the merits of buying an investment property in a trust vs personal? and when its best to do one or the other, and when not to?

[nicki_Member@nicki_Join Date: 2013Post Count: 12]

September 29, 2013 - 12:02 pm

The house I am buying is a very old home which will require some renovations, about $30k or so, which I expect will add to the capital value significantly.

I am planning on keeping this property indefinitely. This means not selling it which means no CGT. Even if I did sell it I have a large capital loss I am carrying from GFC and it would have a 50% discount even if not my PPOR. But, like I keep saying, I am keeping it indefinitely. It will make an ideal rental, very close to the city and in a popular suburb. I'd have to pay land tax if it ever goes over the threshold with the property in my name only if it is a rental investment just the same if it is in the trust.

No chance of me being sued in my profession but I'd like to look at some business opportunities in the next few years.

So, I think people are missing the point. I am not selling this house in the future. I am planning on keeping it long term as a rental investment. When I move out I will keep it. If it would still be better off in my name then fair enough, but so far I haven't seen any other pros for this other than a possible PPOR CGT exemption, depending on circumstance (i.e. if I sell it). In the trust it will allow me to distribute the future income. 

If I buy it in my name then I may as well sell it before the CGT exemption expires but I don't plan on selling it ever so I am not sure I see the point.

[nicki_Member@nicki_Join Date: 2013Post Count: 12]

September 29, 2013 - 8:06 am

Thanks Wilko!

If I told you that the property is under land tax value and I plan to keep it indefinitely, would you think still the same? I plan to keep it as a rental if/when I move out, not sell it. So I thought having flexibility to distribute income + the asset protection would make it a good start to add into a property portfolio in the trust.

Also, the 6 year CGT avoidance – is this even if it is rented out after I have moved out of it as my PPR?

Cheers!

p.s. I have already paid an accountant $200-$300 ph, but realising now that he was not very helpful as he hasn't covered a lot of this. The Lawyer charged $350 for the trust set up. Pockets are not never ending unfortunately, so will have to research and get tips as best i can before going back to see someone else… get more prepared this time. Hence why I am here  

[nicki_Member@nicki_Join Date: 2013Post Count: 12]

September 29, 2013 - 7:07 am

Terryw wrote:

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

Yep, that's why I'm posting in this discussion forum for some helpful suggestions and ideas.

Some helpful discussion on this topic would benefit my understanding and others who would be thinking about this.

[nicki_Member@nicki_Join Date: 2013Post Count: 12]

September 29, 2013 - 4:28 am

Terryw wrote:

nicki_ wrote:

Terryw wrote:

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

I think thats been the point of all the information in my OP.

Limited information.

Well I wouldn't call it nothing.

Thanks for your limited input.

Can't say it was useful. Wasn't asking for much, just to come to a property investing forum and post for ideas and suggestions re. putting a property in a trust or in my name. My guess is people don't know much about it themselves, hence why the responses have been lees than helpful.

[nicki_Member@nicki_Join Date: 2013Post Count: 12]

September 29, 2013 - 3:38 am

Terryw wrote:

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

I think thats been the point of all the information in my OP.

[nicki_Member@nicki_Join Date: 2013Post Count: 12]

September 29, 2013 - 3:17 am

I don't plan on staying there long term but I do plan on keeping it long term as an investment. So based on that would you think the trust is the way to go?

[nicki_Member@nicki_Join Date: 2013Post Count: 12]

September 29, 2013 - 12:58 am

Thanks Terry. The main point of my post was to see if people had thoughts and suggestions about the merits of putting the property in my name or in the trust, based on my situation and projections of my situation (both of which I have explained in detail). Have you any thoughts on whether putting the property it into the trust or in my personal name is the way to go?

Regarding whether I can put it in the trust, transferring interest, and all the legal issues that go with that, I will meet a lawyer and accountant again to clarify. I think I will actually see another lawyer as the lawyer who set up the trust only met with me very briefly, the creation of the trust seemed to be quite generic and was organised by the accountant whom I did meet. I have read it thoroughly and it seems fine though.

Main thing I'm interested to get feedback on is suggestions and the merits (advantages/disadvantages) of putting the property in the trust or in my name given my plans.

[nicki_Member@nicki_Join Date: 2013Post Count: 12]

September 29, 2013 - 12:55 am

Tax is my main concern, but asset protection is also handy. For example, if I have a spouse at home with a child earning no money, I would like to distribute investment income. Like I have said my plan is for this property to be part of my investments long term, not main residence.

The trust was set up by a Lawyer, so why would it not be valid? I suppose the Lawyer could be negligent.

Succession: I have this power (per terms of trust a trust officer which is a Trustee or the Appointer can appoint a successor).

Rent: not manipulating, just its neutral at the moment at market rates. The advice I received is that if I live there and it made a loss, then I would be converting an otherwise non-deductible private expense into a loss. Any ideas on how I can live there and still have the mortgage repaid with the house in the name of the trust? Here is a ruling: http://law.ato.gov.au/atolaw/view.htm?DocID=ITR/IT2167/NAT/ATO/00001

Stamp duty: on the full price at settlement. If transferring the interest then I would pay it on the deposit.

Have you any recommendations or suggestions?

[nicki_Member@nicki_Join Date: 2013Post Count: 12]

September 28, 2013 - 8:33 pm

Hi Terry

What am I trying to achieve? The trust would give me more flexibility in distributing income in the future as long term this will be an investment. It will also enable me to not have the income on top of my personal wage income if I have others to distribute the income to (which is a possibility in the future).

Assigning to the trust – the accountant did not see this as a problem. I can ask a Lawyer also to check.

My trust is structured: Me Appointee, Me Trustee, Me Default Beneficiary. Settlor was the accountant. The plan is for this to change in the future (or at least have the flexibility for it). Are you saying this is not a valid trust?

Succession / lose capacity: I can appoint a successor per the trust structure.

Land tax issues: none currently as property 2 falls beneath the threshold.

Rent from me to the trust: I don't think I explained this well. I meant the trust cannot use it to make a loss if I am living there as it is not 'arms length'. The accountant advised not to do this. I will pay rent and the trust will deduct the interest of the mortgage and break even.

Stamp duty: yes, as I mentioned there will be stamp duty on the deposit ($100). South Australia.