Hi all,
I'm 28, single with one child and own 2 properties with approximately $460,000 equity. One property doesn't have a loan against it. I also own a company and am looking to start another. I also want to invest in more properties and am trying to find the best way to do so.
The outcome I am looking for is to start a (new) business and use that income to give to charity, a basic income for myself, ability to help out family members if they need it and to invest in more properties.
Can anyone suggest a possible method for achieving this through a trust or other combination, such as company/trust?
I could possibly transfer the houses to a trust, however I have lived in both and held them for years (though have run my business from there at times) so I would be able to have some advantages with CGT if I sell or keep them in my name.
The accountant I saw suggested a trust to distribute some money to my daughter, however I read this is not possible as she is only 7?
Can anybody offer some advice?
Always own growth assets under a discretionary trust structure as this offers the greates flexibility in terms of tax and some asset protection as well. Never run a business through the same structure, always have these separate because of the risks.
As you have paid off one property already and run a company you should consider using a DT for the next one as you need not worry about losses accumulating in the trust.
Children can receive distributions from trusts – however they are taxed at penalty rates over a certain amount. They can earn around $3000 pa and pay no tax however.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Hi R F I
I have responded to your post over on Invested: http://www.invested.com.au/4/best-way-start-out-trusts-38274/
Terry is on the right track.
You can distribute up to $3,333 to minors under 18 (including your children or even nieces / nephews etc)
If you are in VIC you can probably transfer the property into a trust with only nominal stamp duty (i.e. virtually no stamp duty – just legal fees) – but you need to plan for any capital gains on the transfer.
Hope this helps!
p.s. Congrats on having such a head start – you are in a great position at such a young age. Quietly jealous over here.
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Yes… agree with above… can distribute to your children 3k pa with 0% tax
Good on you… single with 1 kid and good equityTerry, I went to see my accountant and he suggested to buy using unit trust under DFT to avoid the land tax. Is this sensible?
i.e. discretionary family trust that would own unit trust of the propertygod_of_money wrote:Yes… agree with above… can distribute to your children 3k pa with 0% tax
Good on you… single with 1 kid and good equityTerry, I went to see my accountant and he suggested to buy using unit trust under DFT to avoid the land tax. Is this sensible?
i.e. discretionary family trust that would own unit trust of the propertyHi GOM
Using a unit trust can be a good idea as it may be possible to transfer the units without triggering stamp duty.
I am not sure on the land tax though. I haven't really looked into it, but I don't think it would be possible to avoid land trust in NSW with such a structure. The fact that a discretionary trust is the owner of the units would possibly make it the same as if the property was owned by the discretionary trust itself. Are the solicitor's initials TC?
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
I got confused as well… I thought that you could not really avoid land tax in NSW if buying under DFT. His argument is the owner of the property is unit trust that owned DFT…
I was being told by him that <XXXX> As the trustee of <XXX Family Trust) in the loan document is NOT an appropriate structure.
The loan document should be able to read <XXXX Family trust) only. It is interesting to see many different opinionsThe solicitor is not TC.
Any opinion ?A trust is not a legal entity, so it shouldn't really matter what name the loan is in. Trust name or trustee as trust name either should be fine.
In NSW only fixed trusts get the land tax exemption. DTs are considered special trusts and don't get any threshold. Trustees of fixed trusts (some but not all unit trusts would be fixed) may be assessed as if they were the sole owner.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terry
that is what I think
But my accountant made a big fuss that in term of asset protection, it can be challenged. I am not sure what he mean by that. He told me that it is better to get the loan with <XXX Family trust> as stand alone rather than "ATF".Why is he worried about asset protection relating to a loan? it is the ownership of the property that counts. Maybe he is thinking that the loan could be associated with the trustee in its own right and so if the trust is attacked it would have no loan and more equity. But I can't see this as happening.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
god_of_money wrote:Terry
that is what I think
But my accountant made a big fuss that in term of asset protection, it can be challenged. I am not sure what he mean by that. He told me that it is better to get the loan with <XXX Family trust> as stand alone rather than "ATF".Probably getting confused with double stamp duty implications ?
Cheers,
Rob
Terryw wrote:Why is he worried about asset protection relating to a loan? it is the ownership of the property that counts. Maybe he is thinking that the loan could be associated with the trustee in its own right and so if the trust is attacked it would have no loan and more equity. But I can't see this as happening.Yes… that is correct. He worried about that creditor can challenge it as I am the trustee of my DFT… not yet change to company.
BTW, do you think anyone be able to structure by buying property under DFT and avoid land tax in NSW?
god_of_money wrote:Terryw wrote:Why is he worried about asset protection relating to a loan? it is the ownership of the property that counts. Maybe he is thinking that the loan could be associated with the trustee in its own right and so if the trust is attacked it would have no loan and more equity. But I can't see this as happening.Yes… that is correct. He worried about that creditor can challenge it as I am the trustee of my DFT… not yet change to company.
BTW, do you think anyone be able to structure by buying property under DFT and avoid land tax in NSW?
GOM, the trustee shouldn't matter too much. What I was saying above is that he could be arguing it is possible for someone to say the trustee personally borrowed the money in their own right, ie not as trustee. Having a company that does nothing but act as a trustee would make things clearer to an outsider.
I had a quick look at the land tax laws in NSW, and there doesn't seem any way around paying land tax with a DT. Only fixed trusts qualify for the threshold.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Evolve wrote:If you are in VIC you can probably transfer the property into a trust with only nominal stamp duty (i.e. virtually no stamp duty – just legal fees) – but you need to plan for any capital gains on the transfer.
Hi,
Just wondering if someone can explain this more. I've heard of transferring to your spouse without stamp duty in Victoria but to a trust? Does it have to be a particular type of trust? Any further info would be welcomed.
Andrew
itsandrew
Go as far as you can see and you will see further.
a bare trust would be exempt, under s35, Duties Act
http://www.austlii.edu.au/au/legis/vic/consol_act/da200093/s35.htmlTerryw | 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,
I mainly see talk of discretionary and unit trusts with regards to property, how is a bare trust different? I presume there must be some drawbacks to forego stamp duty concessions.
Andrew
itsandrew
Go as far as you can see and you will see further.
A bare trust is one where A owns for B. No discretion at all.
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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