As a broker and lawyer I would suggest you avoid setting up your loan in such a manner. Commissions don’t change if loans bundled together but there are brokers out there that just use one particular bank and/or product so most of their clients go into the same bank and product. Saves them having to think too much.

Cross coll can be useful in limited circumstances, but not in this situation.

Bit of a broad question.

First thing you should be asking is whether to set up a trust at all.
Then are you considering a company as trustee of a trust or a company with the shares held by a trust.

Then consider
– land tax
– asset protection on bankruptcy
– asset protection on death/estate planning.

e.g. if you are buying in QLD it might be better to have one trust per property as this may mean no land tax payable at all.
If buying in NSW no trust at all might be best, or a company owning the property.
If you have 2 kids you might consider 2 trusts overall so you could leave control of one trust per kid so they don’t have to jointly control.
You might even consider 2 separate companies acting as trustees for 2 separate trusts and then both owning the same property as tenants in common in equal shares. If you have 3 kids it might be as this x3 etc.

Once you decide broadly which structure then you have to consider the structure of the structure.

Then consider funding.

I would never recommend one company act as trustee for multiple trusts though.

Get some legal advice.

Estate planning is more than wills and documentation. Its about planning who takes control of ‘your’ assets after your death or incapacity (or even while still kicking).

I get many clients wanting to gift large sums of cash, or even the majority of their wealth to trusts. They don’t realise that this is really giving assets away. It is generally not a good idea to gift all your assets away, even if it is to a 3rd party that you control. If you control a trust it is only temporary. One day you will lose capacity which will mean someone else will then control the trust or you will die and if you die someone else will control the trust. Trust assets cannot form part of your estate or will (except notional estate in nsw) so you can’t leave assets owned by a trustee via you will. Also children at taxed at penalty rates with income from a trust, yet taxed as adults on income received from a testamentary discretionary trust. So one strategy may be to maximse your estate at death, not minimise it.

Also you can pass control of a trust to people by structuring this in the trust deed or separate deed by passing on the appointor position, but what if you have 2 or 3 kids and pass control of one trust. There are plenty of cases of sisters ripping brothers off etc (one case involved a sister taking $1mil for herself and leaving nothing for the bro).

Trusts – if you have a properly set up trust, and properly transacted its assets will be safe if you become bankrupt. Even if you are the only director, shareholder, appointor and primary beneficiary. I don’t think there is any legal question about this or debate.
But there are exceptions such as transfers from you to the trust done within the previous 5 years at under market value.

If there is a company acting as trustee there will annual asic fees of about $262 (rising annually with cpi)

Jaxon wrote:

Terryw in relation to you,
say a new client walked in and is earning $200,000 a year and wanted to structure asset purchases over the next 10 years and already had $300,000 cash in their bank and never owned any asset in australia.
Their goals are simply to get financially ahead and are open to any path that assist this,
would you look at setting a Family trust for different tax and sales advantages? what would be the main things you would be concerned and thinking?
be keen to hear from someone with such a diverse fields of qualifications.

Hi Jaxon

Well, it would all depend. I would probably suggest if they are going to buy property to buy the first one in their own name and get access to the main residence CGT. If they are concerned about asset protection perhaps a gift and borrow back to a related trustee of a discretionary trust. Estate planning needs to be tied in with disposing of your assets to a trust too.

The next one would depend on the state of purchase, savings rate, cash available, whether negative geared, estate planning etc. If NSW probably not a trust due to the higher land tax.

Was your friend qualified to give such advice?

If the main residence is owned by the lower income earner this may be good for tax purposes if the income will exceed the costs once you move out. But income is only one aspect to consider. What about estate planning, asset protection, CGT, land tax, serviceability, and ability to use various strategies?

If you transfer to a company or trust have you considered the stamp duty, new loans, discharge of mortgages etc? What about land tax going forward?

The building becomes part of the land so ownership of the land is what counts and not who is on the building contract – for tax etc.

Best to get some legal advice.

Good start mate

I like to think in terms of today’s dollars as property and shares should (hopefully) grow at least as fast as inflation.

$200k is that pretax or post tax? That is a lot of money either way, probably 8 times the pension amount. Do you really need this much as the less you need the quicker it will be. Also consider that there may be plenty of ways to make it more tax effective.

5.5% may be a high figure to assume for dividends. I would use 4%
Growth for property and shares might be higher

But assuming 4% you would need $200,000 / 4% = $5mil worth of property at today’s value. This is unencumbered property or shares, other than your main residence.
At $250,000 per property that would mean 20 properties fully paid off (or part property at part shares).

How do you get 20 properties? It will be very difficult to borrow enough to buy say 3 or 4 unless you are on a very high income. So you would need to save like crazy, add value, and perhaps sell a few along the way to get capital to buy more. You can speed things up by improving and selling main residences tax free along the way too (making sure you don’t do this so it amounts to a business).

Remember that CGT is half of income tax generally, and there are many concessions so it is a great way to build up capital over time.

Very lucky!

go see a lawyer

easiest and cheapest way is to not be a director of the trustee and to not give any personal guarantees.

Other ways are to create charges or interests in the property which could take priority over creditors. Lots of issues though

Resi is generally always easier because residential loans are easier. But commercial loans are not covered by the NCCP Act so there may be arguments that these loans are less strict.

Structuring will depend on the circumstances such as strength of parties, agreed split, financing ability,trust.

One I set up recently involved company owning property with 50% each owned by trustees of a discretionary trust. Builder family was a beneficiary of second trust. Company then entered building contract with builders company.

End result
Residential finance
50% profits able to get to builder.
My client retaining full control.