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  • Profile photo of PosEnterprisesPosEnterprises
    Member
    @posenterprises
    Join Date: 2006
    Post Count: 290

    Hi can anyone please give me some guidance with regard to setting up a Trust or not. If i wanted to buy and sell property to build up my cashflow should i do it through a trust? and what if i wanted to also buy and hold for capital growth at a later stage again should i use the same trust.

    1) What type of Trust should i use because i want to pay myself a wage from the property business when i leave my J.O.B.

    2) Should i look at other Income streams or another business and run that through a trust.

    Just need some clarity to which direction i should be heading.

    thanks for any tips or advice.

    [crying]

    Profile photo of brcbrc
    Participant
    @brc
    Join Date: 2002
    Post Count: 63

    I have a business (pty ltd) which is the trustee of my investment trust. I hold shares and real estate in the name of the trust. My wife and I are directors and shareholders of the pty ltd company.

    I use the business for non investing income, and own all ‘doodads’ in the name of the business – ie cars, phones, compfuters. These are all assessable tax expenses and done properly with logbooks and depreciation schedules – all in MYOB.

    The trust has a minimal income that comes in each year and gets distributed to either me or my wife, depending on who has the lowest assessable income for that year. We are both named as beneficiaries. We don’t take any cash out – just the tax for the income, and the ‘distribution’ counts as capital placed back into the trust. At this stage i have a personal guarantee on the loans of the trust but hopefully one day it will stand as it’s own entity for lending purposes and I won’t be tied debtwise to it.

    The big difference with trusts vs businesses is that the profits must be distributed each financial year, whereas with a business (as long as you don’t qualify for PSI rules) you can retain profits and pay them out over a number of years. If you are doing a lot of property buying and selling, a company might be the way to go. Some people form a single company per deal and keep a hierarchy of them.

    However with my other business activities it makes sense to hold assets in a trust in case of either bankruptcy, legal action or whatever else people dream up to try and take what you have. It (the trust) also helps in estate planning (hopefully not a problem for a long time yet)

    It costs several thousand per year of accounting fees to keep all this together so not for people starting out on their first property deal unless they have got the cash to spare. I also spend probably 10 hours a month with accounting tasks to keep track of everything. However I have a bound set of financials going back 5 years and I don’t fill out loan app forms, I just throw the financials on the desk along with a typed ‘proposal for finance’ which gives them much the same info as lenders application forms. Trust me it works.

    This setup just suits me – every person has different goals, is at a different stage in life and has different amounts of assets. Talk to an accountant. Don’t just Google it, pick up the phone and make an appointment.

    _____________________________
    We all need somewhere to live – but do we all need a CBD apartment?

    Profile photo of PosEnterprisesPosEnterprises
    Member
    @posenterprises
    Join Date: 2006
    Post Count: 290

    Thanks for the reply. I have 1 PPOR and 1 IP in my own name and want to purchase another IP in a Trust because i want to purchase multiple properties in the future and want estate planning, protection, income splitting etc.

    I spoke to one accountant and just can’t get a direct answer or may they are waiting until i join up then they will tell me what i should do.

    thanks again[fez]

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

    I think you should keep any investing and any business in a separate entitly. Business is a dangerous game, many get sued and go under. If you had your huses in there with a business, then they would be at risk.

    With property you would generally want a discretionary trust or a hybrid discretionary trust to allow negative gearing. Business would only need a discretionary trust, but should have a pty ldt company for limited liability purposes – with the shares owned by your discretionary trust.

    Terryw
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    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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    Profile photo of Quantum LeapQuantum Leap
    Participant
    @quantum-leap
    Join Date: 2004
    Post Count: 56

    Talk to Dale Gatherum Goss in Melbourne. He is a trust expert and property investment based accountant. I’m sure he’ll help you setup the right structure.

    Rgs

    QL

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