Whilst alot of books recommend putting the property in one name depending on your tax bracket so you can maximise your tax benefits I’ve got some reservations. Whilst you may gain an initial benefit as you build your portfolio, it appears to be to your detriment in retirement.
1) When you need to clear the debt in your 1st retirement year you will pay more on capital gains if in one name than two.
2) To generate a Net income of $50k on one income earner you would have to earn $72k gross.
On two single incomes earning a Net Income of $25.5k each would need a gross of $32k (or $64k total) -these amounts included Medicare Levi$8K Gross extra needed each year if in one name for say 25 years – thats $200k. I’m sure that on its own would cover more than the tax benefits on the way had we had it in one name and also theres still that CGT.
I’m interest to hear what others say and to hopefully prove me wrong. I’m a novice and feel I must have missed something?
Thanks
Using a trust gets around this problem.
Another problem with buying in both names is loans. You can probably borrow more overall by buying in one name only.
Maybe 2 separate trusts would be best. One wtih one partner as the trustee one with the other.
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Andrew
As Michael has already pointed out, a discretionary trust does allow the flexibility to distribute income in any way that you see is appropriate (so long as it’s legal!)
If you need more detailed info on this could I suggest emailing Dale Gatherum-Goss who is a great accountant and based in Melbourne.
His email address is:
Take care
Dave [
]When using a discretionay trust to buy an IP if the IP doesn’t return positive cashflow how we’d claim depreciation?[
]Has anyone thought of using a foreign trust or company that is located within a tax free haven to purchase their property?
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Thanks Guys.I’ll be checking it out.
[:0)]
Hi,
The foreign trust might be a good idea … but … check this out
http://www.firb.gov.au/content/faq.aspYou would then need to get approval from the Foreign Investment Review Board.
Cheers
Tintin
Hi Ksheather,
We are considering setting up something offshore at the moment. We have an appointment tomorrow with the trust guy…..He mentioned something about there being no need for a BVI Trust and just setting up a straight BVI. Also if the directors are Australian citizens then there should be no issues with FIRB.
regards
4wallsHi Michael
It is my understanding that a discretionary trust cannot distribute a loss-whether income or capital. The loss must be retained in the trust and can only be offset by future gains/income. I think you may be thinking of a unit trust or a hybrid unit/discretionary trust?
ksheather and 4walls
I think a foreign company or trust wouldn’t help you much with ownership of property in Australia. The ATO wants to tax Australian residents on their worldwide income. With Tax Havens, people try to hide their income from the ATO. It would be a bit hard to hide rental income sourced in Australia.
Terryw
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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