I am looking to buy my first property within the next couple of months.
I have notice a few comments on these forums saying that companies are the worst structure to use for a property port folio. They didn’t actually state the reasons why. This is important to me as I would like to start out on the right foot. If anyone knows the advantages and disadvantages using a company or trust tructure I would love to hear your point of view.Cheers, Stephen.
I think companies are forwned upon is mainly because companies do not get the 50% CGT exemption which individuals and trusts get after holding the property for 12 months or more. This can amount to hundereds of thousands of $$$$$
Trusts also have tax advantages and asset protection advantages.
Look into getting a trust.
Terryw
Discover Home Loans
North Sydney
[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
Kotzeight,
I have recently gone through the same analysis and from my understanding, the main disadvantages I think are;
1. As mentioned by Terry, no access to capital gains tax 50% discount.
2. Directors can be liable for the debts of the company
3. If shareholders are sued, then there maybe a risk to the assets of the CompanyHowever, if they are used in conjunction with a discretionary trust (as trustee), this can provide very solid asset protection.
James
I have partners which is the main reason we would like to use some sort of separate entity. Who would normally be the trustee in this situation and how much control would us the beneficiaries have over the distribution of funds in discretionary trust.
Stephen.
Stephen, if the partners you have mentioned are not family, I would look at using a unit trust rather than a discretionary trust.
This way, it’s a little similar to a company in that distributions are made on the basis of the unit holdings. With a discretionary trust, if the ‘beneficiaries’ fall out with the trustee, they stand to get nothing at all from the investment, which is not a good way to go if investing with non family.
Cheers
Mel
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