Forum Replies Created
Well your early retirement has probably been derailed now
You need to look at the definition of ‘absentee’ in the land tax act and try to make sure you don’t meet this as your land tax bill will go through the roof.
Absentees are taxed like trusts. the threshold drops from $600,000 to $350,000, the rate is higher plus there is a surcharge on top 1.5% pa of land value
Probably poor wording but ‘you’ cant purchase property with your super, the trustee of your SMSF can though.
But I agree with Richard – why would you want to cause the trustee to do that? Unleveraged property has a low return, could the money be used elsewhere more effectively?
Generally, travel costs are not deductible for property
any legal costs could be a capital cost but as there is no capital gains tax event I don’t see how you could claim these either.
Generally there is no different treatment between tenants in common and joint tenants for stamp duty. JT are considered to be the same as TIC in equal shares.
I don’t think there would be any difference with first home duty concessions either.
In an ideal world you would hold each property under a separate trust, but you have to consider administration and fees. However in QLD it can work out cheaper due to the land tax savings.
Not sure what you mean by a piggy bank trust, but I sometimes recommend clients gift to the trustee of one trust and have the trustee of the second trust borrow this money – or even the individual borrow the money back. I call this trust the banking trust which may be the same thing.
Bucket companies – I often recommend, or structure so you could add one in later.
Under NSW law if a person controls a trust, company etc, the assets of those entities could be ‘attacked’ by the courts having the powers to deem teh assets to be part of the estate of the deceased – under certain limited circumstances.
So if you know or think someone may attack your estate after you death you have to plan carefully, even if you do not live in NSW.
There are no books on asset protection in Australia – plenty of USA ones which won’t apply in the Australian situation. I am writing one on asset protection, but it might be a while until it is finished.
Better in what sense?
Are you trying to avoid assets falling into the wrong hands at death due family disputes or gain asset protection on potential bankruptcy of beneficiaries.
There are many ways that funds funnelled thru different entities can be attacked. There are claw back provisions in state legislation and in the bankruptcy act. e.g you gift money to a spouse, relative or discretionary trust and go bankrupt that money can be clawed back. However the longer ago the gift was the less chance that it would be clawed back.
However, if a trustee or company where to buy shares which doubled in value over night, that equity in the shares might be safe from attack – the initial gift may be clawed back, but the equity may be safe. But companies have shares and if you own the shares and go bankrupt the shares will fall into the hands of creditors who can then get at the company assets.
With discretionary trusts, depending on how they are set up, no beneficiary has any interest in the trust, other than a right for proper adminisation. So even if a beneficiary becomes bankrupt, the creditors can stand in their shoes, but unless the trustee gives them something they are merely potentially beneficiaries of the trust.
A will is hardly bullet proof, not sure what you mean by ‘wishes attached’ but a letter of wishes has no legal weight. It all depends on the circumstances. If you don’t own property, it can’t be passed via your will – example spouse owned property but that can be attacked.
The corporate veil? In some instances the corporate veil could be attached and the director of a company could be personally liable for company debts – insolvent trading, OHS breaches, misleading and deceptive conduct etc. But if a director does not own assets there is not much that can be attached other than the assets of the company in question – which may be $2.
Alan Bond gave personal guarantees of about $900million I think. He defaulted on loans and they when after him personally and trusts and companies he controlled indirectly. I think one argument was that others were providiing him with benefits while he was bankrupt and these benefits should be taxed as income. I don’t think they succeeded, but a lot has changed since then anyway.
Sounds like that house may be in VIC.
If so you are in luck as one spouse can buy out the other spouse at full market value without stamp duty. Any interest on the new borrowings would generally be tax deductible and any cash released can go towards the new PPOR to reduce the non deductible debt.
Not any more buddy!
This stamp duty ‘loophole’ closed last year.
The commission has nothing to do with the crossing, but if you refinance he would get a bigger commission because of the bigger loan.
You signed a contract to pay him, not sure what the ombudsman could do. Why not just instruct him what you want and tell him to do it – no crossing. You are the client and borrower. And don’t go signing anymore contracts!
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.
If you are developing then a whole different structure might be the way to go. You will be able to improve asset protection by segregating risk and assets if you do it properly.
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.
– 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)
I had a friend who bought a property years ago, in his own name because he wanted to get negative gearing benefits. He had a non working wife with no income and he was on the top tax bracket. The property jumped over night and he sold it within 2 years at double what he purchased it for. He was still on the top tax bracket and wore the full capital gain while his wife’s income was $0. But he probably saved $1000 or so on the negative gearing…
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.
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.
No I am asking if you have considered the points I made. I know nothing about your situation so could not recommend one way or the other.
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.