Forums / Getting Technical / Legal & Accounting / PIt – Property Investment Trust – Chan and Naylor

Viewing 11 posts - 1 through 11 (of 11 total)
  • Profile photo of miikemiike
    Participant
    @miike
    Join Date: 2008
    Post Count: 111

    Hi All,

    Just a quick query…

    I am currently investigating different types of trusts…DHT, HT, PIT, etc…

    I am looking for long term asset protection as well as tax benefits.
    My position is that I have 1 PPOR and am looking to setup my structure for my strategy of:
    – buy, reno, rent and hold
    – flipping

    Chan and Naylor accounting provide a trust known as the Property Investment Trust (PIT).

    My understanding is that this has greater benefits for asset protection and tax.

    Can anyone that is using this structure please comment on the:
    – Validity of the trust
    – Structure they have obtained using the trust
    – Known tax benefits
    – Known asset protection
    – Costs to implement the trust

    Details can be found at:
    http://www.chan-naylor.com.au/

    Cheers,
    Miike

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,190

    Hi

    I believe that trust is a unit and discretionary trust combination.

    If you have the unit trust own the asset and the units owned by a discretionary trust, then this is very safe. It may even be possible to transfer the units of the unit trust to a SMSF without stamp duty down the track just before you want to retire.

    The used to advertise the benefits of reduced land tax under these sorts of trusts, but I think the rules changed and this no longer applies.

    Not sure if the PIT provides anything more than a standard UT and DT. Oh, they claim they can get around the rule of perpetuities with their trusts too. Normal trusts must vest within 80 years, but not the PITs apparently. This is done by setting it up in South Australia which is the only state which does not have legislation against perpetuities. Not sure if this would work if you were not a resident of SA and the property of the trust was not in SA.

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

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

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,018

    Financed a couple for clients over the years and i think Terry is spot on.

    Nothing new however they seem to think they have got around the 80 year rule.

    Before however you rush in and part with your hard earned I would check that you can still get finance using such a structure.

    The majority of lenders will want to give such a entity a wide berth in the current climate and in fact i can only think of one or two who would even consider it.

    Interestingly enough those you would think would say Yes will run a mile.

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

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,018

    Financed a couple for clients over the years and i think Terry is spot on.

    Nothing new however they seem to think they have got around the 80 year rule.

    Before however you rush in and part with your hard earned I would check that you can still get finance using such a structure.

    The majority of lenders will want to give such a entity a wide berth in the current climate and in fact i can only think of one or two who would even consider it.

    Interestingly enough those you would think would say Yes will run a mile.

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

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of miikemiike
    Participant
    @miike
    Join Date: 2008
    Post Count: 111

    Thanks for the replies guys.

    As per the above:

    I am 25, single, happy what a wonderful world…

    Looking to setup my structure in order to have asset protection, ownership portability and affective tax.

    I Have:
    – 1 PPOR, under my name
    – Multiple Shares, under my name

    I am looking to use the PPOR and have borrow against the equity to the total amount possible. Use the equity as capital for the next property acquisition and have the new loan in under my trust structure.
    I will also be looking at swapping my PPOR to an IP, unfortunately it will have to remain in my name and cannot be moved to the trust as I F^CKED up by taking the FHOG, what a bad mistake.

    In the neer future I am looking to:
    – Acquire further properties, renovate and either, flip or hold/rent…depending on the property etc.
    – I am also looking to trade shares and currency (forex) under my trust.

    My understanding is the best structure for me would be to have:
    – DHT which owns all assets (shares, properties, forex) and;
    – Business which would own the DHT (with myself as the director, beneficiaries, etc)

    – This would allow me to avoid stamp on portability, if I was to sell part of the business later;
    – All costs would be classed as business tax, not income.
    – I would be protected from any future girlfriends/gold diggers (yes, they are around!)

    Any thoughts…

    This is all very appreciated as I want to fill my head with as much understanding of the best structures (and understanding of them) before I go to discuss this with an accountant.

    Cheers,
    Miike

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,018

    From what you want to achieve i think you will have real financing issues in utilising a PIT or similar beast.

    DFT with either a Company or personal Trustee would be a lot easier to achieve the end result.

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

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of miikemiike
    Participant
    @miike
    Join Date: 2008
    Post Count: 111

    Hi Richard,

    What is a DFT?  I haven't heard of this before…

    Cheers,
    Michael

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,018

    DFT = Discretionary Family Trust

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

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $40M. Ask me for a copy of my API Interview.

    Profile photo of miikemiike
    Participant
    @miike
    Join Date: 2008
    Post Count: 111

    Thanks Richard,

    I'll investigate this…

    Cheers,
    Miike

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,190

    I think you may need a few trusts. Maybe a company for the business and one discretionary trust for property, and ideally another one for shares.

    Hybrid Discretionary trusts are still around, but they are virtually useless now. To get the tax deduction against your personal income your deed will have to be worded so that you the unit holder must get all income and capital gains. So not tax flexibility and no asset protection as the units are property and potentially up for grabs. you could also end up paying CGT twice if the units are redeemed by the trust – you pay cgt then and the trust will pay when it the property is sold as well.

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

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

    Profile photo of muzzwoldmuzzwold
    Participant
    @muzzwold
    Join Date: 2004
    Post Count: 4

    Terry

    1. You discussed using a unit trust to own an asset. When you setup the unit trust would you use a corporate trustee structure?

    2. Can you keep adding assets to the same unit trust throughout the life of the trust?

    3. With all the units owned by a discretionary trust, is the increased asset protection due to the implied wider number of unidentified people who are beneficiaries, and if so, why wouldnt a normal discretionary trust owning the asset be just as goo as the UT/DT structure?

    Muzz

Viewing 11 posts - 1 through 11 (of 11 total)

You must be logged in to reply to this topic.