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You would either have to gift money to the trust or loan money to the trust.
Whichever way you chose could have asset protection implications. eg. if you lend money, then go bankrupt, the money loaned is still your asset. If your money is gifted, then it may be safe – depending on when you gifted it etc.
Terryw
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Don’t worry too much. Negative gearing only lasts for a few years. With rising rents, the property will eventually become positive and then she will be saving tax by having it in the name of the lower income earner. (Assuming things stay the same).
Terryw
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You can’t negative gear in a trust. Losses cannot be distributed, so it probably wouldn’t work.
If you had a hybrid, it would be a different story and the unit holder could go for the tax reduction.
Terryw
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Possibly
Tony Cordato, Cordato Partners http://www.businesslawyer.com.auTerryw
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Anne
I understand what you are trying to say, and think the others have missed it.
The idea is to guarrantee the loan, then setup a new structure when your borrowing capacity maxes out, not telling the new bank that the same person has guarranteed loans for the previous structure.
Will this work?
Maybe. If the new lender does not ask about guarrantees, then you are not lying. However, you CRAA would clearly show the previous applications as inquiries and therefore they would more than likely ask..
Terryw
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There are also a few other mortgage insurers, however most don’t like things this small.
Terryw
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I beleive that buyers agents fees are a capital expense, and therefore are not claimable at all – except gainst capital gains when you sell.
Any fee you borrow to pay for that is for investment purposes should still be claimable.
Terryw
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Originally posted by carl_vic:A trust doesn’t have shares so I’m assuming that the structure you’re talking about involves a company at some level. Is the company the trustee for the trust or a benificiary of the trust? It sounds like the company is a benificiary of the trust and you are trying to access income from the properties by the company paying out dividends to you, is this correct?
As far as I’m aware, if the company is distributing profits from a previous year, which have already been taxed at 30%, then you as the shareholder will recieve franking credits to reflect this, and not have to pay the same tax again. I.e. if youre in the 30% tax bracket you pay no tax on the dividends, if you are in the 42% bracket you might pay 12% etc. I’m not an expert but that’s how I understand it.
Carl
I think you misunderstood the question. Lupus seems to want his/her trust to own shares (eg telstra, qantas etc).
As far as I am aware, the franking credits of shares etc flow thru to the beneficiaries. There may also be issues with Family Trust elections when the dividends are over certain levels per year.
Terryw
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I beleive only the owner can claim the interest. The other person is not on title, therefore not an owner and receives no benefit. I think this is covered in the ATO booklet on rental proeprties.
Terryw
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Aside from the finance side of things, do you really think these would make a good investment? banks are wary of lending for good reason. These sorts of units are hard to sell, and this can limit the capital growth.
Terryw
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Hi Redwing
With a HDT the loan needs to be in the individuals name for them to claim the tax benefits. So far I have seen 2 clients with HDT in place, but they had the loan in the trustee company’s name – unaware.
If it is not a HDT, then I am not sure if it would matter whose name the loan was in, from a taxation point of view anyway.
Terryw
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Originally posted by Brizza:Originally posted by lifeX:You can have the loan in your name and the title of the property in the trusts name for neg. geared scenarios.
Then, the trust is making a profit. And you still get to claim the loss of the loan interest against your own income.
Called Hybrid Discretionary Trust.
Live, Learn and GrowLifexperience
If this structure is used, is the FHOG still able to be claimed as the loan is in my name? Or because a trust is on the title, does this make the FHOG ineligible?
Brizza
FHOG is not available if buying thru a trust.
Terryw
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Hi Calvin
Homepath don’t deal with brokers. I beleive they are a no frills type lender and probably don’t offer an offset account on their cheaper products. I have also heard that they are slow at settling loans.
Terryw
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There is a book going on ebay for about $5. I just posted a link in another post.
Terryw
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It can be rewarding if you get the right property. My friend picked up one in Macquarie Fields in Sydney (the area with the riots recently). She paid $140,000 and resold it a year later for $269,000.
Terryw
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Depending on the property, at least 30-40% I think.
Terryw
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Originally posted by FFComm:Usually there is a CGT rate of 30% for companies, with trusts you get a discount of 50%, therefor 15% (I am assuming that you could move the CGT through a company if you wished).
FFComm
That’s where you have it wrong. Discounts for CGT are only applied in the hands of the beneficiary. Companies don’t get the discount, and therefore would pay 30% CGT on any capital gain.
BTW, I am not an accountant, but this is my understanding.
Terryw
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Originally posted by kerwyn:Hi Richard
You question covers a broad area and really depends on what you want to achieve?
Are you after tax minimisation then a Company is the way to go as you only pay 30 cents in the $ tax. Plus if you are running a business and making a profit from property investing Eg doing renos, you can claim nearly everything to do with property.
If you want asset protection then a discretionary trust is good with a company that does not trade as the trustee on top and the trust underneath. It is good for minimising capital gains also.
I know some people who have a trust for every house they own. So if they are sued, say by a tenant then only that house is venerable and all the other properties are safe.
As our legal system is linked to the British system a trust is common law. It came into existence when an over zealous British king tried to steal the church lands and possessions. The church set up a trust under Joe Blow the farmer who owned nothing as trustee. Since the king could not get anything from the farmer as he owned nothing he could not get access to the trust to steal the churches lands. This is an abbreviated version of the story but close.A company is Admiralty law and is in essence a person who never dies. It can have one or more directors who do not own the company as such but are employed by it. It has special tax laws that are much more flexible than what a normal person has. So if you are going to do property as a business then you should start a company. You can get a shelve company set up for around $1000 and a trust for around $300 to $500.
You can contact Castle Corporate Services PTY LTD on 03 9898 6666 and they will help you out.
KerwynHi Kerwyn
I would ahve to disagree with some things.
A company may not be the best way to go to reduce tax. 30% tax is fairly high. By using a trust, you would have the ability to distribute the income to beneificaries on a much lower income resulting in no, or much lower tax. If no one was available, then you would then be able to distribute to your company and pay a max 30% as a last resort. With a trust, at least you would have the option, and could change it every year.
You can also claim the same expenses without the need for a company.
So someone looking to get into property at a business should really look at a trust setup rather than a company.
Terryw
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Originally posted by richardb78:Hi everyone!!
As the title indicates, unfortunately i have no idea how trust and companies work. I have read some of the replies to other q’s on the forum.
I really would just like to know if anyone out there can recommend books to read in this area. I would rather have a basic understanding of what it is and how it works for property investing.
Im trying to decide whether i should create a company, trust or both for future investments?
thanks heaps!!
RichA good book is
Dale Gatherum Goss “Trust Magic”, http://www.gatherumgoss.com
Terryw
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Redwing
I think one of the benefits of using the SMSF would be when you have retired, transferring a trust property to the SMSF and then selling the property, and getting the reduced CGT available to SMSFs.
Terryw
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