Hi, We currently have 4 investment properties in our names and have considered setting up a trust. My accountant suggested a Discretionary trust with Corporate Trustee. the cost including accounting costs will be $2000. We are looking to buy a property in a month or so and have been told it will take a week or so to set up which is OK. We live in WA but will probably move to QLD next year and maybe back home to NSW in 2 or 3 years. NSW had an extra $500 stamp duty, QLD had none and WA I think was $6. Considering the costs I am wondering if it is worthwhile setting up a trust? We are likely to keep building up our portfolio until we have 7-10 properties in the next 2 or so years, avoiding heavily negatively geared properties.
Questiosn – are trusts worth it? Which state should we set up the trust? Are there any issues with borrowing or releasing equity within a trust?Thank you.
You haven't given enough information to make an informed assessment.
But, think long term. Consider all issues, such as land tax, income tax, CGT, death, asset protection etc.
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, Is it an advantage or disadvantage to have a trust in regards to land tax? We currently have focused mostly on buying in QLD up to now and may buy more in the future – but these houses are in our name. Partner is on good wage, I am on low wage due to part time work. We want to minimise CGT. Death- hopefully not for a while – but have two kids to hand over to eventually. Asset protection – to be honest, since we don't have our own business, I am not sure how worried we should be. Janice
Sounds like you shoudl set up a trust based on your comment. The advantages would surely outweigh any short term negatives like negative gearing being trapped in the trust, slightly higher accounting fees and the set up costs.
As Terry said you should think long term. What do you want your investments to look like in 20 years? Would it be better in 20 years to have the assets held in a discretionary trust structure, a company structure, a unit trust, superannuation fund or in your personal names? Or a combination?
Cheers,
LukeAnd sorry I was meant to add- a $500 stamp duty charge for setting up a trust in NSW is irrevelant and shouldnt affect your decision.
I believe that trustees do get a separate land tax threshold in qld but am not sure on the details. In Nsw a discretionary trust gets no threshold so using a trust may result in more land tax there.
Trust assets don’t belong to you. So they don’t form part of your will. You need extra planning on succession with a trust when you die but there would be no cgt or stamp duty. There would t be any either if held in your own names. One advantage in your own name is that Eli could pass on to your kids in their own names so that they could live in the house cgt and or to a testamentary trust at death which may have more tax advantages.
Many other things to consider too
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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