Forums / Getting Technical / Legal & Accounting / Buying IP and Taxation and Ownership

Viewing 11 posts - 1 through 11 (of 11 total)
  • Profile photo of new2investnew2invest
    Participant
    @new2invest
    Join Date: 2010
    Post Count: 37

    Hi All

    I need some info regarding taxation and IP.
    My Wife and I earn around $200k combined and I am on the higher income and pay more in tax/yr.
    Just wondering if when we buy our first IP if we can specify the % of ownership. Just so when tax time I get a bigger tax savings/refund against my taxable income.

    We both decided that for our first prop we could do 90% on my income since I pay more in tax/yr and 10% on hers. And for other properties we would put 10% on mine and 90% on hers.

    Tax savings would be about $10k based on the property we planned to buy at an auction in 2 weeks.

    Do I have to specify on the contract the % or is it something that can be done at Tax Time or any special forms that needs to be filled?

    Any thoughts on that?

    Profile photo of Mick CMick C
    Participant
    @shape
    Join Date: 2010
    Post Count: 1,099

    A lot of ppl would tell you to use a trust, as it will give you the flexabililty of shifting the tax position and ownership year by year + protection.

    However to keep things simple- you can buy it in both names and have a nominated % ( more for the higher income owner…you)- the slae contract will have this as ” Tenants in Common” – and you will nominate the %… it has to be set up correctly right from the start BEFORE you sign the 10% deposit contract….

    See an accountant before you go ahead with any purchase.

    Regards
    Michael

    Mick C | Shape Home Loans
    http://www.shapehomeloans.com.au/
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    Same Banks. Better Rates. Served With a Passion.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,173

    ownership issues need careful consideration.

    Buying in your name now may help you reduce your tax by negative gearing in the short term, but what happens when the property starts making a profit? You will end up paying even more tax.

    You should also consider asset protection and estate planning issues.

    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 new2investnew2invest
    Participant
    @new2invest
    Join Date: 2010
    Post Count: 37

    @shape and @terryw thanx for the valuable info.
    I read about Trust etc….but dont really want to get into that right now considering it’s my first IP.

    I’ll just make an appointment with a property accountant to go over this.
    I also look in the contract for the “Tenants in common’ can’t find it.
    My next step is visit an accountant and see what he/she says on the trust subject…..

    Any recommendation?
    I am in Melbourne and work on St Kilda Rd, would be great if I could get an accountant around…the area.

    Profile photo of Mick CMick C
    Participant
    @shape
    Join Date: 2010
    Post Count: 1,099

    Tenants in common- you will find it on the bottom of a standard “2005 sale contract” OR if it’s a RESVIC contract it will written within the first 4 pages.

    Regards
    Michael

    Mick C | Shape Home Loans
    http://www.shapehomeloans.com.au/
    Email Me | Phone Me

    Same Banks. Better Rates. Served With a Passion.

    Profile photo of luke86luke86
    Participant
    @luke86
    Join Date: 2010
    Post Count: 470

    I don't think you should make the decision not to purchase in a trust just because it is your first property and it seems hard. It is pretty easy if you have a good accountant, and would surely save you money in tax in the long term as Terry has mentioned.

    Cheers,
    Luke

    Profile photo of new2investnew2invest
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    @new2invest
    Join Date: 2010
    Post Count: 37

    @luke86

    Trust is the number 1 question on my list when I visit my accountant this week.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,173
    new2invest wrote:
    @luke86 Trust is the number 1 question on my list when I visit my accountant this week.

    Try to read as much as you can before hand so that it all doesn't go over your head.

    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 Callaughan PartnersCallaughan Partners
    Participant
    @callaughan-partners
    Join Date: 2011
    Post Count: 4

    You always need to get the structure correct from the begining and be prepared to pay for the setup and cost involved, it will save you money down the future.
    Buying in a discretionary trust, you cannot distribute the losses, so therefore there is no tax benefit to yourself. In NSW you will also be up for Land tax.
    If you are buying to reduce your tax (negative gearing) then you will need to buy in your own name or use a hybird trust, it is costly to setup and you will also be liable for Stamp Duty, but it is has the negatively gearing benefit along with asset protection and the benefit later down the track when the property becomes positive. Just becare when setting one of these up.

    Brad
    Callaughan Partners
    Accountants and Business Advisors
    Advice is general in nature.

    Profile photo of new2investnew2invest
    Participant
    @new2invest
    Join Date: 2010
    Post Count: 37

    I have been reading about PIT (Property Investment Trust) from Ed Chan book.

    Any thoughts on that? Anyone using such a trust.

    I rang them yesterday and i gotta book 3 weeks in advance to talk to someone and the cost is $300/hr.
    So before I pay that $300 would be good to hear more from people who’s using PIT.

    Thank You all for your thoughts so far.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,173

    What does the book say? Especially in regards to Land Tax and distribution of income?

    I would suggest you do your research before signing up for a trust.

    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/

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