Usually there is a CGT rate of 30% for companies, with trusts you get a discount of 50%, therefor 15% (I am assuming that you could move the CGT through a company if you wished).
As you have shown it can vary depending on the flow through entity. For example an indivdual with no taxable income: $100K /50% = $50K; $50K after tax = $11K; Which is under 15%.
It really depends on income. But I must say that alot less workers are on the highest marginal tax bracket. Even on $100k per yr. which isn’t chicken feed your really only paying $35k / 35% tax (inc. medicare – that is according to ATO calculator, which assumes no salary packaging, no HECS, allowances/pensions, etc). Say you add $50K to your $100K income, on the $150K you pay basically $60k, which is 40% tax rate.And no. [offtopic] [baaa]
FFComm
Originally posted by richardb78:Hi everyone!!
As the title indicates, unfortunately i have no idea how trust and companies work. I have read some of the replies to other q’s on the forum.
I really would just like to know if anyone out there can recommend books to read in this area. I would rather have a basic understanding of what it is and how it works for property investing.
Im trying to decide whether i should create a company, trust or both for future investments?
thanks heaps!!
RichA good book is
Dale Gatherum Goss “Trust Magic”, http://www.gatherumgoss.com
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
Originally posted by kerwyn:Hi Richard
You question covers a broad area and really depends on what you want to achieve?
Are you after tax minimisation then a Company is the way to go as you only pay 30 cents in the $ tax. Plus if you are running a business and making a profit from property investing Eg doing renos, you can claim nearly everything to do with property.
If you want asset protection then a discretionary trust is good with a company that does not trade as the trustee on top and the trust underneath. It is good for minimising capital gains also.
I know some people who have a trust for every house they own. So if they are sued, say by a tenant then only that house is venerable and all the other properties are safe.
As our legal system is linked to the British system a trust is common law. It came into existence when an over zealous British king tried to steal the church lands and possessions. The church set up a trust under Joe Blow the farmer who owned nothing as trustee. Since the king could not get anything from the farmer as he owned nothing he could not get access to the trust to steal the churches lands. This is an abbreviated version of the story but close.A company is Admiralty law and is in essence a person who never dies. It can have one or more directors who do not own the company as such but are employed by it. It has special tax laws that are much more flexible than what a normal person has. So if you are going to do property as a business then you should start a company. You can get a shelve company set up for around $1000 and a trust for around $300 to $500.
You can contact Castle Corporate Services PTY LTD on 03 9898 6666 and they will help you out.
KerwynHi Kerwyn
I would ahve to disagree with some things.
A company may not be the best way to go to reduce tax. 30% tax is fairly high. By using a trust, you would have the ability to distribute the income to beneificaries on a much lower income resulting in no, or much lower tax. If no one was available, then you would then be able to distribute to your company and pay a max 30% as a last resort. With a trust, at least you would have the option, and could change it every year.
You can also claim the same expenses without the need for a company.
So someone looking to get into property at a business should really look at a trust setup rather than a company.
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
Originally posted by FFComm:Usually there is a CGT rate of 30% for companies, with trusts you get a discount of 50%, therefor 15% (I am assuming that you could move the CGT through a company if you wished).
FFComm
That’s where you have it wrong. Discounts for CGT are only applied in the hands of the beneficiary. Companies don’t get the discount, and therefore would pay 30% CGT on any capital gain.
BTW, I am not an accountant, but this is my understanding.
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
I agree with Terryw. The last beneficiary should be a company but only after every other option is exhausted.
CATA
Asset Protection Specialist
[email protected]thanks to everyone’s imput here.. Has really opened things up for me!
Cheers all.
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