Hi,
I am looking to setup a family trust with siblings to start purchasing property. There will be 3 of us, each putting in an equal amount of $$ to make up a total of $110,000. What are the benefits of having a Company act as Trustee over a person/individual. Or vice versa? Currently there is not a company created, so this would need to be established if I went this way.
Main reason for using a trust is for administration purposes of having 3 people involved
Thanks in advance
Jason
Assumng u r going to leverage this start up money x 5 through debt, will u buy 1 IP for 500k or 2 x 250k??
Will this entity have any other income other than rent from the IP?
If NO!
What tax benefits are you missing out on?
You could receive thousands p.a. from tax rebates assuming negative gearing and depreciations if run through your personal situations assuming u all have taxible incomes.
To hold 1 or even 2 – 3 IP you might consider tenants in common as opposed to a trust structure.
Make sure u have a deed of understanding from the outset.
Thrash out all the what if's, document the details.
Good luck
A company has many advantages over individuals as trustees
1) There is no confusion over who owns the asset.
If you were personal trustee, then there is a question on if the property is owned by you or the trust. If you have a company as trustee, there is less confusion – especially if this is all the company does2) Asset protection
Trustees of a trust can be sued, so having a company there limits liability3) Easier for loans and control/ownership
It is easier to switch and add people for loan servicing. eg. one partner wants out, he just resigns as director and you reach an agreement on split up of costs etc. No need to change title deeds.If loans need some extra income for servicing, you could also add a director and get another person to help with a guarantee.
There may be a few more reasons too, but that is all I can think of atm.
Also be careful from a loan point of view as you generally don't want too many people giving guarantees out as this will affect serviceability.
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
Thanks Terry and Hans.
A question. If I put the $110k into my own PPOR creating equity, and then redraw it and loan to Company/Trust to buy property then that $110k against the PPOR would be tax deductable against my tax? Or am I a bit tired and not making sense?
Appreciate your comments
Jason, its the purpose of the loan not the underlying security which determines tax deductibility.
To your question, YES if you redraw the money to invest
jsawtell wrote:Thanks Terry and Hans.A question. If I put the $110k into my own PPOR creating equity, and then redraw it and loan to Company/Trust to buy property then that $110k against the PPOR would be tax deductable against my tax? Or am I a bit tired and not making sense?
Appreciate your comments
it wouldn't be deductible against your tax, but the trust's.
You would be lending money to your trust, with the trust charging you interest at the same rate as you are being charged. So your income from interest will equal your deduction for interest charged, leaving your trust with the deduction.
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
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