Thanks All,
can we buy under trust and become one of us trustee ( we are two partner ) and later in near future open some company and make that company trustee to give more protection to us?
or what is best for two working people to buy IP together from assets protection and tax wise?
Cheers
AmitBanks are becoming increasingly aware of the risks of lending to trusts and companies as it brings in the element of a “3rd person”. HOMESIDE advises against lending and other banks use similar guidelines.
Hi amit
you can both be trusttees of the trust.
If you want to later you can set up a company to be the trustee, therefore a corporate trustee. All you need to do is change the trustee this will not contitute a sale therefore no CGT is applicable. But you may have some issues with your loans. In the case where you are a trustee you will buy the house in your name, in your capacity as trustee. The morgage will be in your name in the change to a corporate trustee you may need to set up new mortgage’s. It’s a bit complicated isn’t it.
So i think get the stucture you want from the beginning.
I’m not an accountant so check with the proffessionals. But remember they make their bread and butter from administering companies. Find an accountant you can trust.
regards westan
PS you were quick to make that Tax(i) alteration i was about to have some fun at your expensewestan,
why do u want to put your home in a family trust
and when you say a family trust, what do you mean by family trust?And yes, my accountancy fees are quite heafty, but the tax savings and asset protection are worth it
If you change trustees, you will trigger a CGT event, I think its E1 or something like that
Also there will also be stamp duty issue on change of trustee
ergo you have to decide now before who will become the trustee.Mensch
I spoke to my accountant on Monday and he stated that achange of trustee does not contitute a CGT issue as the asset is still owned by the trust. This accountant has written a 200page book on trusts, so i accepted what he said.
I will put my own home in the trust if i rent it out. The house is worth about 150k and the rental income should be about 400pw. I am expecting prices to plateau for a while and am aware i lose capital gains exemptions. I also plan to do some improvements in the next few years if i return to live in it and will then be able to claim these as deductions.
any comments appreciated
regards westanwestan [
]
You were very very quick to notice!
I have some questions for you I will ask in my next post ( i am very busy today at work [] )but in short we two friends want to buy a investment property (not home for us to live in) and want good structure.Cheers
AmitWestan
ru sure?
I spoke to this tax lawyer and he told me a change in trustees will trigger a CGT event. The trustee is the owners of the asset and held in trust for the trust. If you change trustees, the ato will require a re-evaluation of the trust assets and wack a CGT on that?
that’s what I’ve been told anyway
I’ll have to look this up now
Here’s my two cents worth…on the subject of structure…
Reducing your tax bill should be a secondary issue to asset protection.
What if you are driving home from work one day and while you briefly change radio stations you don’t see some kid on a bike and wamo! Hes in hospital a paraplegic. Do you think the parents will come after you for every cent your worth? Of course. I’m not trying to be dramatic here but these things happen. every day.
The only way to protect your assets is to not have them in your personal name. After all the game is about how many assests you CONTROL not own.
Some would argue that you never really own real estate any how. To prove my theory try not paying your shire rates for a few years!![
]Tilly,
in regards to MVA, compulsory third party covers all damages to people whom you injury. the insurance company pays for all that. the one you should look out for is people who work for you at your home and slip and fall and break their neck. if they’re not covered and you’re not covered, then you’ll be in deep S#%t
Well, bad example on my part.[
]but I’m sure you get my drift.[]I think your home and landlords insurance has a liability cover.
If your tenant sues you, lets say faulty wiring, electrocution, and you have no assetts, then all he/she can go for is your home in the trust, I quess, and this will be highly mortgaged anyway!
Ed Burton keeps telling us: You’re a penniless bum, you own nothing. Nonetheless, we have 3 properties in our name, including own home.For the rest we have a company structure which act for several trusts.MENSCH:
Just wanted to clarify, changing trustee does NOT trigger a CGT event. It may cause issues with mortgages and the terms may limit a change to trustee, especially if you are moving from an individual to a corporation. The latter should also be fine with the financier if it is a $2 shelf company and you are the sole director.ALL:
In summary, if you are a serious prop investor (planning to purchase multiple properties), you should use trusts (and place just a few properties or $value in a trust). You should have a non-trading shelf company set up as the trustee with you as the sole director and shareholder. The corporate trustee adds another layer of protection.John
M1in12
can you tell me where i can find this information please cause it looks like the information i have may be erroneous
thanks
I believe a hybrid trust is your answer!!
Hi All,
After getting all the reply I am thinking if some one like me starting in IP should just create a simple trust (we two friends will be buying together). I don’t think this trust will help us much from tax wise (Am I right).
IP bought under this trust will be safe from other liability (outside the property),if in case one of us face in future.
Because we will be trustee so sort of we won’t be protected if some thing goes wrong in IP (which are under that trust) but because we will be having all the insurance so every thing should be fine.
To protect our self more (even from those IP problem which are under trust) we should be having a $2 company as a trust. But this thing having trust under company will blow away all our profit at least in the beginning of our investment journey.
Please comment if my understanding is wrong.
Cheers
AmitTilly and Mensch
Just imagine in Tilly’s example, if the driver of the car had one drink before driving. the Insurance company would be likely to wiggle out of paying and the driver would then probably be sued.
Regina
A tenant ‘may’ be able sue the trustee as the ‘owner’ of the property in some circumstances (say the faulty wiring was illegal repairs?). If a $2 company was trustee this would add more protection as the trustee would have no assets, whereas an individual trustee would. (Not sure if the house would be an accessible asset in this case).
M1in12 and mensch
Changing trustees in some circumstances may trigger a CGT event. I think if there is a substantial change in any of the major beneficiaries the CGT event may be triggered. Usually the trustees are the main beneficiaries. if you change to an different individual trustee you may change the main beneficiaries as a result. Changing to a corporate trustee with the previous trustee as director may not. Better check with a solicitor before you do anything. Paying a couple of hundered dollars now for some good advice may save you tens of thousands later!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
My 2 bobs worth,
Changing trustee shouldn’t trigger a CGT event as the trustee only owns the assets “on behalf of the trust”. As there is no change in beneficial ownership there shouldn’t be CGT.
Rod.
Hi there[
]
Im a newcomer to the IP world and learn heaps from all the fantastic comments and topics that you guys discuss.Among other things im interested in learning more about family trusts and corporate structures etc. what are the best ways to find info on these subjects ie books, solicitors & websites etc.[
]Hello,
I have set up a Family Trust and attached to an Investment Company (Pty Ltd)
The Trust purchases property which is kept safe (hopefully) from any personal loss.
My situation is slightly different as I am a beneficiary of two other Trusts which are attached to two successful companies (I receive untaxed dividends which I send to the Family trust) and I am also a PAYG wage earner to one of companies.
I move untaxed monies from the trust to my home line of credit mortgage (to decrease the interest payments by 10K per year) and move the monies back to the family trust at tax time.
The family trust only has one property at the moment, which is neg. geared. So the next obvious choice is a pos. cash flow property….
Anyone else have a similar structure???
]
] )but in short we two friends want to buy a investment property (not home for us to live in) and want good structure.
]
]but I’m sure you get my drift.[
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