Dear All,
I am new to property investment but am looking to get into it in a big way. It is a simple question, but maybe not a simple answer. Should I set up a company before I start to buy property to rent, or is it easier to have it in my own name?
Any guidance would be greatly appreciated.
Thanks
[
]Hi,
You are right it is not necassarily a simple answer, but at least you are asking the right ones!
If you were planning on only owning 1 or 2 PI’s then I would suggest it would not be worth your time setting up a company, as there are other substantial on-going and upfront costs involved.
Depending on your marginal tax rate it may even be better from a tax point of view to hold it in your own name. However if it is higher than 30% then a company would be supperior (if you were going to buy more than one or two). I say 30% because this is the rate a company is taxed at.If it was your plan to purchase heaps of Properties, then for best asset protection and tax minimisation (and a few other things such as borrowing power) then it would be best to setup a company / trust structure. BUT before you go down this track you must make sure you are 100% sure that you are in property for the long term, and that it is’nt just going to be a flash in the pan.
It comes back to what your gaols and apirations are, and what you are trying to achieve.
Tell us that and we might be able to provide a more specific answer.
Also note: I recommend you look at buying Steve’s latest product to do with asset protection etc called “Wealth Guardian” I think!! Steve should be able to fill you in though. I’d recommend it for anyone considering these types of issues.
Hope this helps,
Tim wilson.
“Poverty is not an option”
Should you go down the company line, please remember a company do not get CGT relieve. A savings of 50% can be substantial.
Thanks Tim and Trueblue,
I am most definately in this for the long term and am looking at purchasing at least one property every 6 months. Thus within a five year period I will have at least 10 properties. I will need to look at the tax breaks that a company will offer as opposed to an individual, but the information you have given is very useful. I work in Hong Kong and therefore there are other issues that need addressing, such as having to purchase new property as I am not a resident of Australia.
Anyway thanks for the info!
Just a thought – “Opportunities to make money are all around you!
Hope you all have a profitable week!
[]i am still a bit blur over this company/trust thingy.
Ok, my tax rate is 30%, and i am starting to buy Positive Cashflow Properties, and i will be buying more of these to support my ability to have a Negative Gearing property. As Brad Sugars says it should be about 4 PI and 1 Neg Gear in one wealth Wheel.1)So , should i be better off with a company u think? (i dont think i will be selling any of my PI properties, but i will sell some Reno ones to get cashflow. ,Maybe its better to do the reno one in my own name???>)[?]
2)Whats the difference between a Co and a Trust? Tell me more about them pls.
Hello Everyone,
The difference is not easy to explain, however…
The basic difference between a company and a trust for tax purposes, is that a company is taxed at a rate of 30%. The company then distributes the proceesds to their shareholders, and if tax is taken out, it is known as an imputation credit.That is, the distribution will be added to your income, and the tax already paid (imputation credit) will be credited to you.A trust distributes to its beneficiaries. The distribution is also added to their assessable income.
The advantage of a discretionary trust is that you can choose which beneficary recieves the distribution, and to what amount. This can aid in minimising tax, as the income can go to the beneficiaries with the least assessable income.
Hope this helps
Femia Property Group
Property Investment Consultants
http://www.femiapropertygroup.com.auDoes a trust provide the ability to aportion losses in the same way as income?
What are the typical setup and running costs for a trust?
Thanks
newguyCan someone explain to me how the 50% discount on CGT applies to individuals. Why is there a discount?
I suppose I should already know this! [
]Thanks, Andrew.
The 50% discount on CGT applies to individuals, partnerships & trust who have held a property or shares for at least one year. However a company is not entitle to this concession. This is provided for in the Income Tax Act. For more info on CGT, go to http://www.ato.gov.au
Hi,
For more info on capital gains see:
http://www.ato.gov.au/content.asp?doc=/content/Individuals/22313.htm
Bye,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
One strategy i have encountered is a unit trust feeding a family trust. when you apportion cg to the beneficieries you aportion as much as possible to low income earners, eg children grand parents, this reduces accessible income, the great thing is you never actually have to hand over the money it is simply a paper transaction so the money is still yours. I dont know the details but it sounds great if you have young kids.
Please note there is a difference between a unit trust and a discretionary trust. Distribution to a unit trust is in according to the units held. A discretionary trust allows you to distribute as you see fit & is therefore considered a superior structure for both tax planning & asset protection.
True Blue
You certainly are right. A discretionary trust is the best way to plan.
Just 2 small note,
1) – Im quite sure that losses can not be distributed from trusts.
2) – Its best to distribute any profits, or risk being taxed heavily.
David Femia
Femia Property Group
Property Investment Consultants
http://www.femiapropertygroup.com.auHello Michael,
Reading back on the last post, it wasnt exactly clear.
I was referring to the trust distributions as income, rather than capital losses.
David Femia
Femia Property Group
Property Investment Consultants
http://www.femiapropertygroup.com.au
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