Hi guys,
Got a question I need help on.
I have a piece of land that is going to be subdivided and sell off. It won’t be completed until the next financial year. When all this is done, I stand to make $200k profit. My question is, knowing that I will make the $200k (finger cross), can I distribute the fund to myself now? Effectively borrowing money from the bank to pay myself first and when the deal is done, distribute the remaining part.
Thanks in advance for your help.
Regards
ptni dont get it???
1. You know you will make 200k from this subdivsion ( im guessing from past sales etc)
2. You want to somehow get hold on this 200k BEFORE the subdivsion ? …?? from who? the buyer? the bank??Regards
MichaelMick C | Shape Home Loans
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Hi Michael,
I got a bit excited and with all the editing, I missed out the important part.
I have a family trusts which purchased an IP some time ago. This IP has some equity after refinance. I want this equity (borrowed $$ loan from bank) to distribute $50k to myself this financial year so that when I sell my subdivided lot next year I can claim that $50k distributed already. Assuming that I can sell the vacant lot for $200k.
Hope this is a lot clearer.
Regards
ptn.This is a complex Q. It may be possible to convert future profits into income at present – but since trusts cannot retail income it would be to be distributed – but I guess it could be done as loan account.
You need a good tax advisor for this.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Quote:I have a family trusts which purchased an IP some time ago. This IP has some equity after refinance. I want this equity (borrowed $$ loan from bank) to distribute $50k to myself this financial year so that when I sell my subdivided lot next year I can claim that $50k distributed already. Assuming that I can sell the vacant lot for $200k.Hope this is a lot clearer.
.So you want $50k income this year and $150 next year? No, you can't do it. You can't record any profit on the sale of the land until you at least have a contract on the land.
You can access $50k from the trust, but it would be treated as a loan, rather than taxable income.
You will be taxed on your share of profit from the trust, not how much cash you actually receive from the trust.
Hi ptn,
Is your concern that you will earn too much income in the year you sell the land, and therefore pay high marginal tax rates?
Or is your concern about simply accessing the money tied up in the land and trust?
Regards
Richard
Thanks for your answer guys,
The main reason I need to access the $50k now is because I need a bank loan for another IP. The bank won't lend me money because I do not have enough servicability (disregards how much equity or asset I have). I am told that the trusts can employ me to do investment activity and therefore pay a fee. In this case, an annnual salary.
I've also been advised to open a company on top of the trusts to formalise it.
Further more, as KG insinuated, when the trusts distribute 200k in the next financial year, I am up for 200k taxable income. By paying me early, I am reducing that hugh taxable income next financial year.
I don't know what is legal and what is possible. I am getting mixed message and the IP is extremely important to me.
Thanks in advance for your advice guys.
Ptn
Does the trust have $50,000? If so it can lend you.
If not, then how could it pay you? It could borrow but if you are the person behind the trust and cannot borrow then your trust probably cannot either.
Opening a company on top won't formalise things! I thnk you are mixed up a bit here. You might be talking about establishing a company to act as trustee – but if your trust has already been set up and it already owns land then this is no simple matter. First, you will have to establish if stamp duty will be payable on the transfer of title and then you will have to actually transfer title to the land. This will also entail getting new loans if the land is used as security.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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Hi Terry,
1. The trusts has $50k cash equity.
2. The company will be a trustee of the trusts.
3. The company will pay me (individual) a fee for service.
4. Do I need to transfer the land into the company when it's just a trustee? confused why…If the company pays me as individual, then the bank only need to know about my income. Will they question the trusts or the company?
Thanks
ptnhi Ptn
Sounds like you don't understand trusts – no offence meant, but keep on learning.
The $50k cash equity, is this cash or equity? If it is cash can't you just borrow it off the trustee?
Who is the trustee now?
The company can pay you a fee – but why would you want to do that?
The trustee is the legal owner of the assets of the 'trust' so all assets should be in the name of the trustee.
Maybe you are trying to increase your borrowing capacity by having the trust pay you a fee? This won't really work as the banks will want to see the tax returns of hte companies and trusts which you are associated with. The fee will also be taxable income to you.
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
Hi Terry,
No offence taken and I agree, I don't understand trusts very well.
Yes, the goal is to get higher borrowing capacity.
In order to do this, I need an annual salary that is being paid by a company (or a trusts??). The 50k cash equity comes from refinance from the bank a year ago.
I guest what I am asking is HOW I can do it. (I've been told it can be done and have been done by wealthy developer).
Thanks guys,
ptn
It might work if you were employed by some other third party
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
Hi Terry,
The funny thing is that this was brought to my attention by a CBA mortgage manager. I can't deal with him since he knows too much about my financial position but he recommend that I research into trusts and mortgage broker.
Is there anyone here specialising in trusts mortgage?
Thanks in advance.
ptn
Most of the brokers here understand loans for trusts.
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
Whats the point of having a trust vs normal name?
Cheers
Jpcashflow | JP Financial Group
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Jpcashflow wrote:Whats the point of having a trust vs normal name?Cheers
much greater asset protection and tax flexibility which can result in substantial tax savings.
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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