All Topics / Legal & Accounting / Trustee – Personal or Company/corporate?

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  • Profile photo of jsawtelljsawtell
    Participant
    @jsawtell
    Join Date: 2007
    Post Count: 57

    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

    Profile photo of hschmidhschmid
    Participant
    @hschmid
    Join Date: 2007
    Post Count: 87

    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

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

    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 does

    2) Asset protection
    Trustees of a trust can be sued, so having a company there limits liability

    3) 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
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of jsawtelljsawtell
    Participant
    @jsawtell
    Join Date: 2007
    Post Count: 57

    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

    Profile photo of hschmidhschmid
    Participant
    @hschmid
    Join Date: 2007
    Post Count: 87

    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

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    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
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

Viewing 6 posts - 1 through 6 (of 6 total)

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