All Topics / Legal & Accounting / Discretionary Trust

Viewing 6 posts - 1 through 6 (of 6 total)
  • Profile photo of PropertySeekerPropertySeeker
    Participant
    @propertyseeker
    Join Date: 2006
    Post Count: 43

    Hi everyone,

    I'm at a point where land tax is becoming a problem, I have been reading about Discretionary Trust aka Family Trust and how it may help to reduce land tax? Can someone give me a brief idea how this would work?

    Thanks
    PropertySeeker

    Profile photo of mike hmike h
    Participant
    @mike-h
    Join Date: 2005
    Post Count: 18

    Which state are you or your properties based in?

    In NSW at least, discretionary trusts do not receive the land tax threshold. I believe the other states have similar rules.

    The two commonly used strategies to minimise land tax are:
    1. Use up the land tax thresholds you receive as an individual.
    2. Spread your investments across different states the utilise the thresholds in each state.

    There is a good thread on somersoft that contains quite a lot of useful information:

    http://somersoft.com/forums/showthread.php?t=9263

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

    I'm at a point where land tax is becoming a problem, I have been reading about Discretionary Trust aka Family Trust and how it may help to reduce land tax? Can someone give me a brief idea how this would work?

    Thanks
    PropertySeeker

    Discretionary trusts won't help reduce land tax, in NSW anyway.

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

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

    Profile photo of AALLIIAALLII
    Participant
    @aallii
    Join Date: 2012
    Post Count: 37

    Hi a little unrelated to the intial post but nonetheless relevant to topic heading…

    I have been advised that to get a loan with no financial backing except a stable and high income I can form a discretionary trust structure, have myself as a beneficiary and one other person as a beneficiary (i.e. parents) who have a fixed security (personal home equity). If all the beneficiaries become guarantors, the trust may be able to obtain a loan given that servicability is satisfied with my income and security is satisfied using the security.

    Please advise if any finance gurus here?

    Profile photo of luke86luke86
    Participant
    @luke86
    Join Date: 2010
    Post Count: 470
    AALLII wrote:
    Hi a little unrelated to the intial post but nonetheless relevant to topic heading…

    I have been advised that to get a loan with no financial backing except a stable and high income I can form a discretionary trust structure, have myself as a beneficiary and one other person as a beneficiary (i.e. parents) who have a fixed security (personal home equity). If all the beneficiaries become guarantors, the trust may be able to obtain a loan given that servicability is satisfied with my income and security is satisfied using the security.

    Please advise if any finance gurus here?

    You can do this without a trust so it isn't exactly a genius idea.

    The problem with the strategy that you have suggested is that the bank has security over 100% of your parents house. If the investment goes bad and they force a sale of the investment property, the bank can force the sale of your parents house to recover any money owed.

    A much wiser strategy would be using a LOC secured against the existing prooperty and lending the money to the trust. If things go bad then at least you can keep making the LOC payment and the bank can;t force the sale of your parents house.

    But the question I would be asking is why do you need the securtity of your parents house if you have a high income? I dont mean to be rude or offend, but you should be able to provide a deposit yourself if you have a high income. It sounds like you have a spending problem if you hava a high income but no savings, so you really need to fix that instead of relying on your parents to prop up your investing.

    Cheers,
    Luke

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

    Using a trust makes it easier to get finance in this regard as you can introduce income guarantors easily without having to change title. This is especially good if down the track, after owing the property, if one person was to get a credit blemish.

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

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

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

You must be logged in to reply to this topic. If you don't have an account, you can register here.