Hi fellow entrepreneurs,
The setup of the arrangement I am hoping to make with a investor is the following, and I am wondering if a hybrid trust is the best way to go.
Currently it is my father and I that will be running the process of the developments. We will also have an outside investor providing the finance (effectively operating as a silent partner). We will be taking on the role of selling all the property our selves with a property developers license as I am qualified to be a registered sales person. There will therefor be a company involved as it is required as we will be selling more then 6 properties each year.
Also I have read some scattered information about CGT. The question I had in regards to it was if the money remains in the trust account untouched for 12 months does it qualify for the 50% exemption.
If this is not the best type of trust to have what recommendations do you have?
All input appreciated.
Cheers
Ezn
Firstly if you are purchasing land and developing this in the course of business you will not receive any CGT concession as the profit will all be treated as Trading Income and subsequently Taxed at 30% being the Company Tax rate. The factthat you don't draw down the funds from your investor has no bearing on the matter.
From your reference to the 6 properties per year I assume that the developments are in Qld so Yes you will required to hold Developer Licnese as required under the Property and Motor Traders Act.
I think you maybe better off with a Discretionary Trust over a HDT given that the business will be hopefully making a profit.
Richard Taylor | Australia's leading private lender
HDTs are looking very unstable at the moment, some deeds will definitely fail the interest deductibility aspect with the ATO. So best to avoid at the moment. Anyway, as Richard alluded to, they are only good when a income loss will be incurred,
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
Would the situation change if the properties were sold through agents instead and the properties were not sold under a developers name. By doin this I would obviously still need a Trust account to hold all the profits from sales and split the income accordningly.
cheers
If the Agent sells the properties for you then in Qld anyway a Developers License is not required.
I am slightly lost as to what you are trying to achieve. Whether the property is held in a "Developers Name" (Not exactly sure what you mean there) or your own personal name ATF FT the profits will still be considered as trading profit and no CGT concession will be available.
Richard Taylor | Australia's leading private lender
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