Can someone explain the disadvantages of a discretionary trust when investing in property. I heard something about no exemption on land tax.
As far as i know (and i stand to be corrected), the only disadvantages with trusts, in relation to land tax, is that every time you approach the cap you need to create another trust and put any more properties you purchase into there.
All this means is you incur the costs of setting up a new trust structure again, which is neglible when compared to the amount of wealth you can gain by investing.
Cheers,
J.Troy
Under NSW legislation, a discretionary trust which owns property is subject to land tax immediately, as it is not subject to the land tax exemption.
In the unlikely situation, that you have set up a unit trust, in these situations you would receive the land tax exemption. Most people do not set up unit trusts because it is not as flexiable as discretionary trust.
The other disadvantages for trusts, it that if the trust makes an overall loss, this loss remains in the trust (until the trust makes a profit) and cannot be distributed out to beneficiaries.
DC
David,
Just curious, do you know if the same applies to hybrid trusts, and whether the rulings are consistent throughout all states?
Thanks,
J.Hi J.,
Not sure where you are, but In QLD there is no distinction regarding trusts. All trusts are land taxed based on unimproved land value on a sliding scale the maximum being 1.8% for >1.5 MIL. The cap for QLD is 170K for trusts, NSW I think is around 260K (don’t know if trusts are taxed differently to this) and victoria do the .1c-5c in the dollar over 150K thing. In any case, you can potentially hold quite a few properties (depending on value) in a trust before you have to set up another. The cost of which I think would be well worth it in the long run.
Hope that helps you out a little,
Hungry[
]Guys
I am assuming we are not talking about wrapping merely buy IP’s. Certainly from a Qld perspective there is no Land Tax payable when you wrap.
Cheers Richard
[email protected]There is no such thing as a problem.
Just a solution waiting to be foundRichard Taylor | Australia's leading private lender
Hello,
WA is much the same. Land tax is still applicable.
David Femia
Femia Property Group
Property Investment Consultants
http://www.femiapropertygroup.com.au
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