However, It may be kept open if you have enough security in another property.

So pointers:
– NEVER run a business from a trust that owns assets – if the business fails the assets will be at risk.
– Probably best to use a Pty Ltd company for running the business with the shares of the company owned by a discretionary trust.
– A business cannot be trustee, only a person or a company. You would get more asset protection by having another company operate as trustee for your property trust rather than a person.
– Never run a business as a sole trader. ie in your name with a business name registered. very dangerous.

I would suggest you talk to a good accountant and get something set up as there are many opportunities for you. You could buy the place you will live in in a trust and have the trust claim everything. This can be good, but you won't be utlising the CGT exemption as this won't be available.

What you could do is to buy somewhere, live in it briefly and then move out. Then you can claim this place as the main residence for up to 6 years absence. Then you buy the place in the trust and live in that. That way you will still have the main residence CGT exemption and the benefits of negative gearing your own property.

You will also need to work out the best way of utlising your savings and the company's savings. eg do you loan it to the trust or gift it etc.

Trust assets are separate from personal assets. So if you were to go bankrupt they are not treated as your own – with a few exceptions such as if you transfered a property you owned to the trust with the intention to defeat creditors etc.

May I should elaborate.

if you are sued you may have to pay some one a sum of money. If you don't they have a few options available such as having your assets seized and sold or being bankrupted.

Assets which can come under the control of the bankruptcy trustee or be seized and sold includs all sorts of property such as land, real property, cars, units in unit trusts etc.

Discretionary trusts are different. Because the trustee in a discretionary trust holds the property of the trust for the benefit of a wide class of beneficiaries and they have absolute discretion on who they distribute profit or capital to no one beneficiary has an absolute entitlement to the property of the trust. If any one beneficiary went bankrupt the trustee would simply not distibute anything to that person while they weere in bankruptcy (otherwise they will loose the distribution to the bankruptcy trustee).

Unit trusts have no protection because the unit holder holds a fixed interest in the assets of the trust. But you can still obtain asset protection by having the units of the unit trust owned by a discretionary trust.

It depends on how valuable the properties are. And in some states there is no stamp duty on a trust deed – so they are very cheap to set up, (no stamp duty in QLD i beleive, it is $550 in NSW now)

BTW, the guarantee is not just a phone call, but a legal document with most lenders requiring the guarantor to go and see a lawyer to get legal advice. The lawyer must sit down and explain that if the person on the loan cannot pay then the guarantor will be required to pay the loan, if they don't they can be sued etc. There are added costs for this, most lawyers charging a few hundred. And to make things worse, you may not be able to use the same lawyer that is acting for your entity as it be a a conflict for them to represent a borrower and the guarantor and the bank may insist on the independent legal advice. All the costs start to add up.

Hi Steve

Thanks for the reply.  I think the issue may be that you are dealing with the business banking sections which may have different rules for high net worth clients. I don't deal with BW or NAB much anymore so am not aware of their current policies (I am getting out of broking in the near future). Maybe someone who has used them lately could clarrify. I know the residential retail arm of bankwest generally don't like trusts at all.

Whether you can get more finance or not multiple trusts is the way to go for other reasons, such as asset protection.

You shouldn't get getting this sort of advice from accountants Jack. Its legal advice.

There are a number of reasons why a person could be sued. Many are business related or even investment related. eg say you bought some houses and then you set up a trust and bought a few more. Things go bad, you lose you job etc and the bank starts recovery action, but there is a short fall. They get court orders to seize your personal property – your stamp collection, BMW and plasma TV. But it is not enough to satisfy the judgment so they bankrupt you. Generally the property in the discretionary trust is pretty safe.

There is a case, where a Landlord sued by tenant who tripped on carpet injuring her back
Muir v Hume  [2003] QSC 191
http://archive.sclqld.org.au/qjudgment/2003/QSC03-191.pdf

Or Golfer sued because of ball strike
Ollier v Magnetic Island Country Club Incorporated & Shanahan [2003]. QSC 263
http://archive.sclqld.org.au/qjudgment/2003/QSC03-263.pdf

Appeal of Ollier v Magnetic Island Country Club Incorporated & Shanahan [2003]. QSC 263
Ollier v Magnetic Island Country Club Inc & Anor [2004] QCA 137 (30 April 2004)
http://www.austlii.edu.au/au/cases/qld/QCA/2004/137.html

Have a read of the judgment amounts there.

Chris,

its not where the 30% goes, but how the remaining 70% is borrowed that is the problem. With hyrbid trusts the owner of the property is usually not the same as the borrower and this is what creates the problems.

yep, a pdf version.