All Topics / Legal & Accounting / Selling property to a family trust

Viewing 20 posts - 1 through 20 (of 24 total)
  • Profile photo of co_olco_ol
    Participant
    @co_ol
    Join Date: 2006
    Post Count: 1

    Hi
    We run a small business and currently own outright an investment property . We are still renting and wanting to buy a property to get out of the rental market. We would like to utilize the proceeds of selling the investment property for purchasing our own property and trying the find the best possible solution and minimize the tax implications.
    I guess one option would be to create a family trust and sell the property to the trust and possible can keep the property and still have access to the proceeds of the sale.
    What are the tax implications of doing so and would I have to pay stamp duty (QLD)?
    Is there anything else I need to consider doing this?
    It is very hard to find any information on the net and I’m hoping that someone more expierenced can help me out.
    Thanks

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Hi there

    It is a question that crops up from time to time so maybe do a search and read the previous responses.

    I have done if for clients on many ocassions (normally it is a principal place of residence which in turn they rent out and buy another PPOR with 100% non tax deductible borrowing) in Qld and the process is as follows:

    1) Obtain a letterhead valuation from a local real estate (ideally you want this as low as possible).
    2) Draw up the Form 1 Transfer in the Trust name with the letterhead valuation being the purchase price.
    3) An application for finance can be made on this basis.
    4) On the basis that the Trustees can show sufficient income to service a loan you will be able to borrow upto 95% of the Transfer value.
    5) The net loan proceeds are yours to do whatever you wish.

    Downside

    1) Stamp Duty will be payable on the Transfer value and also mortgage duty on the amount borrowed.
    2) The property when sold maybe liable for CGT
    3) If the property is currently an IP then when sold a CGT will be triggered. Might want to check the dates to see if any exemption could apply.

    Is there any reason why you wouldn’t move into the IP and then gear against it.

    Happy to help if you need further advice.

    Cheers

    Richard Taylor
    Residential & Commercial Finance Broker
    100% Finance on selected properties in the USA.
    Email us to be added to our mailing list.
    [email protected]
    Ph: 07-3720 1888

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me

    100% Investment Finance now available on selected properties. Email us for further information.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Richard has outlined it clearly, but I would suggest looking at getting your valuation as high as possible.
    This may cost a little bit more in stamp duty, but could save your trust more in CGT if the property is ever sold. It will also help you borrow more.

    Terryw
    Discover Home Loans
    Parramatta
    [email protected]
    Sign up to my mailing list.
    Just send me a blank email, with “subscribe” in subject line.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of Cabo WaboCabo Wabo
    Participant
    @cabo-wabo
    Join Date: 2005
    Post Count: 117

    I agree with Terryw about getting the valuation as high as possible (only if it has been you PPOR up until now.) If it was an IP i’d say get the valuation as low as possible.

    By the way, I have a question:

    I was under the impression that if you sell a property to ur family trust (and that property was originally in your name only),

    …and you are the sole director of the trustee pty that is purchasing the property,

    ….and you are the principle benificiary of the trust,

    ….then you would not need to pay stamp duty on transfer as the property was upon sale, still of financial benifit to only one person – that being you

    …. and you could avoid SD based on this technicality…???

    Thoughts?

    Cabo Wabo

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Cabo

    Regretfully not.

    currently own outright an investment property .

    Cheers

    Richard Taylor
    Residential & Commercial Finance Broker
    100% Finance on selected properties in the USA.
    Email us to be added to our mailing list.
    [email protected]
    Ph: 07-3720 1888

    Richard Taylor | Mortgage Broker helping investors build their wealth thru property
    http://www.mortgagecapitalaustralia.com.au
    Email Me

    100% Investment Finance now available on selected properties. Email us for further information.

    Profile photo of Cabo WaboCabo Wabo
    Participant
    @cabo-wabo
    Join Date: 2005
    Post Count: 117
    Profile photo of catacata
    Participant
    @cata
    Join Date: 2005
    Post Count: 559

    You are basiclly selling the property to the trust and will encur all relevant costs.

    CATA
    Asset Protection Specialist
    [email protected]

    Profile photo of ctaingctaing
    Participant
    @ctaing
    Join Date: 2006
    Post Count: 111

    Can this be done? Sorry to sound stupid indeed.

    ATO would ask if it is at all an arm’s length transaction – the ‘buying & selling’ within related parties (trustee, director of co, and individual all tangled up) to gain what seems to be a tax minimisation scheme.

    I would do it if I can sleep at night.[worried]

    CT

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    CT, has been done by many. As long as all valuations stack up, the ATO is not missing out – well maybe by a little bit!

    I suppose they could argue that it is a scheme designed to minimise tax, and they may have a point – div 4a. But tax is not the only reason, there are asset protection issues and estate planning issues as well.

    Terryw
    Discover Home Loans
    Parramatta
    [email protected]
    Sign up to my mailing list.
    Just send me a blank email, with “subscribe” in subject line.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    CT, has been done by many. As long as all valuations stack up, the ATO is not missing out – well maybe by a little bit!

    I suppose they could argue that it is a scheme designed to minimise tax, and they may have a point – div 4a. But tax is not the only reason, there are asset protection issues and estate planning issues as well.

    Terryw
    Discover Home Loans
    Parramatta
    [email protected]
    Sign up to my mailing list.
    Just send me a blank email, with “subscribe” in subject line.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of redwingredwing
    Participant
    @redwing
    Join Date: 2003
    Post Count: 2,733

    If that Trust also holds other Properties or is then used to acquire additional properties that would also strengthen the case as it would show intent would it not?

    “Money is a currency, like electricity and it requires momentum to make it Effective”

    Online Positive Cashflow and Renovating Calculators

    Profile photo of Cabo WaboCabo Wabo
    Participant
    @cabo-wabo
    Join Date: 2005
    Post Count: 117

    My accountant reckons he’s done it before for a client and didn’t have to pay SD. Maybe i should pick his brains more about it….

    Cabo Wabo

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    Cabo Wabo

    Did he say which state the property was in?

    Terryw
    Discover Home Loans
    Parramatta
    [email protected]
    Sign up to my mailing list.
    Just send me a blank email, with “subscribe” in subject line.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of Cabo WaboCabo Wabo
    Participant
    @cabo-wabo
    Join Date: 2005
    Post Count: 117

    i’ll ask… does it make a difference?

    Cabo Wabo

    Profile photo of catacata
    Participant
    @cata
    Join Date: 2005
    Post Count: 559

    Stamp duty goes to the Office of State Revenue which varies from state to state.

    CATA
    Asset Protection Specialist
    [email protected]

    Profile photo of tammytammy
    Member
    @tammy
    Join Date: 2005
    Post Count: 155

    How about selling PPOR to trust and then leasing it back? Then transferring PPOR status to buy build sell projects (1per annum). I have asked 3 accountants about this and have recieved 3 different opinions, yes, no and yes but dont use a trust, just do it in your own name.
    If any one has a learned opinion I would be interested. I am in muddy waters at the moment.
    Tammy

    Profile photo of redwingredwing
    Participant
    @redwing
    Join Date: 2003
    Post Count: 2,733

    Do you mean sellling the PPoR to the Trust and then renting it from the Trust yourself as well as using the equity to fund H&L Packages or similar?

    “Money is a currency, like electricity and it requires momentum to make it Effective”

    Online Positive Cashflow and Renovating Calculators

    Profile photo of tammytammy
    Member
    @tammy
    Join Date: 2005
    Post Count: 155

    Yes, Sorry for not explaining that a little better.

    The original intent was to build and sell current PPOR and move to the one now being built, (with view to repeat 12 months later). Thus taking advantage of any equity without being CGT penalised. Add children to the mix and current build property no longer is suitable. So short story is how to minimise tax that will be payable. Hence the visits to find an accountant, and the 3 opiniions given.
    Again any clarity is appreciated.
    T

    Profile photo of fbd1fbd1
    Member
    @fbd1
    Join Date: 2006
    Post Count: 65

    Hi there,
    We are in exactly the same situation at the moment. I have heard it said that you don’t have to pay SD if the Directors & shareholders are the same as the individual, however after professional advice it is NOT true. (in Qld anyway)

    We were in the process of changing our premises over to our family trust. All documents were drawn up ready to go. We had a valuer come and assess the premises. We were ready to go ahead and then I saw a post on the forum & thought I will just look into it further.

    The value of the property being transferred has to be market value and the SD and associated costs does have to be paid on the sale. The costs involved and the CGT paid on the property would have been huge, so we decided that leaving it in our own names would far outway the small amount of tax savings made over the term of the leases going into place befor Xmas. Also the fact that we intend to keep this property – it made no sense transferring the names into our family trust. It would be wasted money.

    Thank goodness we stopped it before it went through…[chill]
    Cheers
    Dianne Burns

    Profile photo of redwingredwing
    Participant
    @redwing
    Join Date: 2003
    Post Count: 2,733

    I would’ve been of the opinion that if you sold the property to the trust and then rented back again it would be seen as being set up to avoid tax as well as costing you money to “sell” it to the Trust?

    If you are looking atdoing H&L packages and other strategies then purchasing through a Trust is a great move for its Asset Protection, Estate and Retirement Planning and flexibility.

    We worth talking to someone well versed in these structures for IP’s if you decide to go ahead

    We have several in individual and joint names and also hold and plan to acquire additional in a HDT as it suits our strategy

    “Money is a currency, like electricity and it requires momentum to make it Effective”

    Online Positive Cashflow and Renovating Calculators

Viewing 20 posts - 1 through 20 (of 24 total)

You must be logged in to reply to this topic. If you don't have an account, you can register here.