All Topics / Legal & Accounting / To Trust or not to Trust: that is the question.

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  • Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    I just looked up http://www.firb.gov.au and this is what it says on companies and trusts:

    Under the Act, a foreign person is:

    • a natural person not ordinarily resident in Australia;
    • a corporation in which a natural person not ordinarily resident in Australia or a foreign corporation holds a controlling interest (that is, a holding of 15 percent or more);
    • a corporation in which 2 or more persons, each of whom is either a natural person not ordinarily resident in Australia or a foreign corporation, hold an aggregate controlling interest (that is, a total holding of 40 percent or more);
    • the trustee of a trust estate in which a natural person not ordinarily resident in Australia or a foreign corporation holds a substantial interest; or
    • the trustee of a trust estate in which 2 or more persons, each of whom is either a natural person not ordinarily resident in Australia or a foreign corporation, hold an aggregate substantial interest.

    A substantial foreign interest (ie, a controlling interest) occurs when a single foreigner (and any associates) has 15 per cent or more of the ownership or several foreigners (and any associates) have 40 per cent or more in aggregate of the ownership of any corporation, business or trust.

    The Government seeks to ensure that foreign investment in residential real estate increases the housing stock. The Government, therefore, seeks to channel foreign investment into activity that directly increases the supply of new housing (that is, new developments – house and land packages, home units, townhouses, etc) and brings benefits to the local building industry and their suppliers.

    The policy on developed residential real estate is negative. The effect is twofold. First, it helps reduce the possibility of excess demand building up in the existing housing market and secondly, it aims to encourage the supply of new dwellings, many of which would become available to Australian residents, either for purchase or rent, therefore maintaining greater stability of house prices and the affordability of housing for Australians.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of lordoftheundeadlordoftheundead
    Member
    @lordoftheundead
    Join Date: 2008
    Post Count: 31

    Thanks Terry and Eddie,

    your both a great help.

    i am looking into setting up a trust and finding an aussie to be the director of the trustee company until i get my pemanent residents.

    as im trying to be creative in order to own 2nd dwellings i was wondering if either of you had any experience in using bare trusts?

    i ask this as its my understanding that the legal ownership can be held by someone until the true owner requests it, in my case the legal owner could be a citizen and i could request ownership of it at a later date

    cheers

    pete

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Hi Pete

    A bear trust is where A owns for B. B is the true owner, A just the legal owner. So I don't think you would pass the FIRB rules on this.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of eddieceddiec
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    @eddiec
    Join Date: 2004
    Post Count: 113

    I agree.  Under a bare trust, you retain beneficial interest in the property and I doubt FIRB would permit that.  On the other hand, if you are using a discretionary trust under which there is generally no presently entitled beneficiary at any one time (unless the trustee makes a distribution of corpus), it's an entirely different proposition from the bare trust scenario.

    Eddie
    [email protected]

    Profile photo of eddieceddiec
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    @eddiec
    Join Date: 2004
    Post Count: 113

    PS – even so, I would still check with FIRB to see if a discretionary trust is acceptable on an anonymous basis.  Not familiar with the FIRB law myself but there are far reaching tracing provisions in the tax law that would drag related entities, including discretionary trusts, into various rules.  I would imagine FIRB wouldn't be too dissimilar.

    Eddie
    [email protected]

    Profile photo of icecoolicecool
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    @icecool
    Join Date: 2007
    Post Count: 24

    Hi Daniel,  we are in Melb as well & i think we r in a similar situation as u. Do you mind sharing who is the accountant you ended up with? Or can u email me? R u from m'sia? Appreciate. <[email protected]>

    Profile photo of danielleedaniellee
    Member
    @daniellee
    Join Date: 2006
    Post Count: 197

    Hi,

    Time to give an update to this thread.

    As mentioned, I met up with this knowledgeable accountant who helped us with the DT. The DT Deed was set up by a Sydney law firm called Hunt & Hunt, which TerryW tells me is a good firm and does good DT deeds. We got all the paperwork signed on Thursday 19th Feb and am now working on the IP loan.

    The icing on the cake is that the whole price cost $1505 only, for DT with Corporate Trustee including advice and free 1st hour. Almost $1K cheaper than the first accountant who quoted me.

    IceCool, here are the details of the accountant.

    George Psiakis
    Phone: 03 8545 8588
    Located in Oakleigh East.

    There are a bunch of old-timers who have been around the block a few times, and seem to give the appropriate advice when I ask, either they are good, or I am still asking the wrong questions.

    Personally, I am from Singapore, right south of Malaysia. Not sure how you imagined I was from Malaysia, as I do not recall leaving my country of origin. Anyway, I will be attending the March APN meeting at whitehorse Rd, Nunawading, so if you are attending and see a geeky Chinese fellow, that's me.

    Cheers
    Daniel Lee  

    Profile photo of icecoolicecool
    Member
    @icecool
    Join Date: 2007
    Post Count: 24

    hey daniel, thanks for sharing your info generously.
    just my wide guess of your country of origin.. well we r from Singapore as well & still trying to establish here.  we are very very new to all these IP issues. it will be good to have honest friends who share the same interest. any good advice is welcome. keep in touch here or u can email me. thks again..

    Profile photo of plasticscalpelplasticscalpel
    Member
    @plasticscalpel
    Join Date: 2009
    Post Count: 8

    @ Daniel

    Just been reading through this thread. My heart sank when, back in December last year, you wrote:

    daniellee wrote:
    FYI: The accountant I will be meeting is Nancy Keep. Noticed that she was recommended by some Melbourne-based forumites in the past.

    Keep everyone updated.

    Cheers
    Daniel

    My girlfriend and I had a really bad experience with Nancy Keep when we set out on our investing journey last year. She is not someone you want to have anything to do with, in our opinion. She is greedy and expensive. She charged us for an introductory meeting where she tried to sell us properties that a developer she knew was selling, she gave us no advice at all, instead keeping silent whilst we filled the awkward gaps of silence!

    To quote her “I prefer to go with what the client wants to talk about and tend to let them lead the conversations. It’s part of our holistic approach, actually listening and working with where you are at and what is foremost for you, not me.”

    Fortunately, this waste of time only cost $220! When asked about her fees, she went on to explain that she normally charged $250 per hour for her time and her most junior members charged $180 per hour for their time. What a pleasure it must be to work in that office!

    Seriously though, I’m glad you found someone else.

    Profile photo of danielleedaniellee
    Member
    @daniellee
    Join Date: 2006
    Post Count: 197

    IceCool: I will PM you. Always good to meet fellow countryman who are interested in PI. Will trade some info and take it from there.

    Plasticscalpel: When we went to Nancy Keep, she took that approach of letting us speak and responding to our questions, so we got out from that meeting what we asked her. Still, perhaps it was because we were not asking the right questions to start with. Clearly, she must be good for the advanced investors than for newbies like us.

    I am surprised she charged $220, because she charged us $180 for the first hour as we were new clients.

    Oh well, I am satisfied with the current accountant at the moment, so lets see where it goes.

    Cheers
    Daniel Lee

    Profile photo of icecoolicecool
    Member
    @icecool
    Join Date: 2007
    Post Count: 24

    hey daniel, will be arranging to meet up the accountant this week. very nervous indeed & i think it will be wise to prepare some notes & decide the name for trust. anything else i need to prepare? my husband is working so i'll hv to go alone. keep in touch. any advice is welcome, thanks in advance ([email protected] & mobile: 0407895678 – Lyn Lim)

    Profile photo of PosEnterprisesPosEnterprises
    Member
    @posenterprises
    Join Date: 2006
    Post Count: 290

    Do you have to pay capital gains tax if you sell your PPOR into a Trust and turn in into IP. Do you  have to pay Stamp duty on the full selling price also plus what other charges do you have to pay?

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Vic

    There is no CGT on the sale of a PPOR to a Trust however Stamp Duty is payable on the full Transfer value.

    Richard Taylor | Australia's leading private lender

    Profile photo of PosEnterprisesPosEnterprises
    Member
    @posenterprises
    Join Date: 2006
    Post Count: 290

    Thanks Richard so you pay two lots of stamp duty if purchasing a new PPOR as well as other bank and govt charges.  hmmm I better keep saving then.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Yes regretfully so.

    Richard Taylor | Australia's leading private lender

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Pos, Don't forget conveyancing costs.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

    Profile photo of danielleedaniellee
    Member
    @daniellee
    Join Date: 2006
    Post Count: 197

    Hi

    A quick update.

    We purchased a property using the DT and settlement is on Friday 3rd July.

    Next stop, final inspection and organising the reno.

    Regards
    Daniel

    Profile photo of Investors ZorbaInvestors Zorba
    Member
    @investors-zorba
    Join Date: 2009
    Post Count: 58
    Qlds007 wrote:
    Vic

    There is no CGT on the sale of a PPOR to a Trust however Stamp Duty is payable on the full Transfer value.

    Oh yeah we sold our PPOR into our PIT and the downside was the Stamp duty!!

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    IZ – Yes thats what i said but depending on the numbers can be very worth it.

    Personally I would not have touched a PIT as i am not aware of too many lenders who will lend against the structure these days.

    Richard Taylor | Australia's leading private lender

    Profile photo of 4jojo4jojo
    Participant
    @4jojo
    Join Date: 2009
    Post Count: 18

    Hi Daniel,

    Just wondering if yr still following this forum.  If yes, I'd be interested knowing how did yr DT fund work out after a few years of using it?

    What was the actual name of the trust fund u set up?   Was it a DT with corporate trustee?

    I am very interested because I am not in a fairly similiar situation to what u where in a few years back.  That is trying to work out if we should set up a trust fund, if yes why and also what type.

    (As a side note:  I have been to Singapore 5 times for holidays- love it – can't understand why anyone would want to leave…) but then again Australia pretty good too. –

    I am living in a small town in WA and we only have access to two accountants – which from personal experience are expensive and hopeless.  So I am looking for a great accountant  who really know there stuff when it comes to trust, trust tax etc.

    If anyone else besides Daniel reads this post (I know Terry and Richard have been long time members) maybe someone can recommend some accountants who I could contact via phone, email.  Of course  I would like to be able to have a sit down meeting but that might not be possible.  I am happy to discuss my plans over the phone with them and send my stuff via post.

    This forum has really helped me, with some ideas.   (thanks Daniel for asking the questions in the first place) and (thanks Terry and Richard) and other people too many to mention for contributing.

    I will wait and see if I get any replies – if not that ok.  I will visit other forum/pages too.

    Thanks.

Viewing 20 posts - 101 through 120 (of 120 total)

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