All Topics / Legal & Accounting / Buying using a Trust Structure

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  • Profile photo of BrizzaBrizza
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    @brizza
    Join Date: 2003
    Post Count: 75

    I’m looking to purchase an IP between 200k to 250k.
    I have a 50k deposit.
    I don’t want to purchase it in my name though. I briefly looked at a company structure but soon found out that there will be a high rate of tax when I do sell it one day.

    What about a Trust structure? From my brief searching, it seems as though this is the norm. and is regularly done. How does it work with finance?

    Profile photo of Jamie MooreJamie Moore
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    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    Hiya

    I wouldn’t say purchasing under a trust is the norm – in fact, I’m seeing less and less of it these days.

    It has its pros/cons and is something you should speak to your accountant about before deciding as it will be dependent on your individual circumstances.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
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    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    I specialise in trusts as a lawyer and mortgage broker yet it is not the norm with my clients either. Possibly 20% of my clients use trusts to own real property.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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    Profile photo of Richard TaylorRichard Taylor
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    @qlds007
    Join Date: 2003
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    There are a number of reasons why you would consider buying or not buying in Trust and these will depend on your personal circumstances and longer term goals.

    As far as financing a deal in Trust many lenders will have no issue and offer the same rate / application charges etc as they would if you were buying in your own personal name whilst others will treat it as business purchase and limit the discounts.

    Your Broker should be able to guide you thru the maze.

    Cheers

    Yours in Finance

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    Profile photo of Anthony KAnthony K
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    @anthony-k
    Join Date: 2010
    Post Count: 56

    Hey Brizza
    Do not buy any property in your own name unles you want to leave it unprotected from crditors and lawyers who want to screw you over. The other reason is if you buy in your own name you can NEVER transfer it into your SMSF because its poisoned.
    Trusts are can be pretty simple thats why the Smart Money uses them they ar also cheap from $150 to $500.00 and you dont need to pay NSW Stamp Duty (the last time I did was in 1996 when it was $200) now it’s $500, so dont give your money to the NSW Govt.
    You should use a company trustee but you only pay for it once and use it for ever. If you can’t afford the annual fdee $236.00 then you wil need help with proeprty investing. It never cease to amaze me that many peop[le worry about a few hundred dollas for a proper structure but dont flinch when the Govt. screws them for outrageous Stamp Duty costs.
    Thats my rant for now.
    Regards
    Anthony K

    Profile photo of TerrywTerryw
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    @terryw
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    Buying real property as a trustee is often a mistake, especially in NSW because of land tax. 1.6% of land value in tax per year for a property can be a killer.

    e.g $400,0000 land value = Nil tax in your own name (assuming your first property) but $8000 per year in land tax every year. That is a huge difference.

    Add in the fact that a trust is treat as a separate tax entity so any losses cannot be used to offer your personal income could mean another $2k to $5k pa to hold in the early years.

    Setting up a cheap online trust can also cost you more, much more because of errors, wrong terms, wrong party in the wrong place etc.

    This is why you need legal advice.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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    Profile photo of HonaHona
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    @hompandey22662
    Join Date: 2003
    Post Count: 1

    Family Discretionary Trust with corporate trustee:
    I have been told that I can set this up and I can still get -ve gearing, 50% concession in capital gain tax when selling, can transfer to other family member without new stamp duty and also get benefit of distributing income to lower tax family members.
    Anyone have some experience if this is all TRUE?

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
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    Not true.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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    Profile photo of Corey BattCorey Batt
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    @cjaysa
    Join Date: 2012
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    Pretty uncommon for clients to purchase in a trust, less than 10% I’d say. Usually they are self employed and looking for asset protection, or income splitting in *some* cases.

    Financing trusts isn’t that difficult generally, just an extra layer of paperwork and supporting documentation. Hybrid discretionary trusts have a very small range of lenders who will lend to them and have fallen out of favour with most investors as I’ve noted. Unit trusts have a large numbers of lenders who are happy to finance through them, and discretionary/family trusts are as common as it gets.

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    Profile photo of superAndrewsuperAndrew
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    @superandrew
    Join Date: 2014
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    Hybrid and Unit trusts also don’t necessarily offer you asset protection because the Units issued can be considered an asset.

    Has anyone had any experience with the Property Investor Trust?

    Cheers

    Andrew

    superAndrew | Property Analyser and Finder Tool
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    Profile photo of Corey BattCorey Batt
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    @cjaysa
    Join Date: 2012
    Post Count: 1,010

    Hybrid and Unit trusts also don’t necessarily offer you asset protection because the Units issued can be considered an asset.

    Correct, and you’ll find the people using unit trusts in particular are using it to extend land tax thresholds, or JV’s.

    Corey Batt | Precision Funding
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    Investment Focused Finance Strategist - servicing Australia-wide

    Profile photo of RPIRPI
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    @rpi
    Join Date: 2012
    Post Count: 308

    Hybrid and Unit trusts also don’t necessarily offer you asset protection because the Units issued can be considered an asset.

    Has anyone had any experience with the Property Investor Trust?

    Cheers

    Andrew

    Experience no. Have not seen it tested in Court as yet, and would need to before I would advise my clients to use.

    In QLD most of the developers that we deal with use discretionary trusts if they are involved with any one outside of their family. Unit trusts are the most common for non related parties, then companies and then own names.

    Investors we would have mostly own names, then discretionary trusts. In the conveyancing practice we would settle a couple of discretionary trust purchases a day, and a couple of unit trusts a week. SMSF purchases are actually outnumbering the unit trust purchases at present.

    We were using a partitioning structure for development among partners but are awaiting the outcome of a court case (none of my clients) that if it goes one way could be bad for this structure.

    We have now developed (in conjunction with a top tax law barrister) an alternative structure utilising a number of bare trusts which allows non related parties some beneficial treatments in development. It is not cheap and requires a private binding ruling but save more in tax then it costs.

    RPI | Certus Legal Group / PRO Town Planners
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    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
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    Yes, I have advised a few clients on these trust deeds. There are many different versions and I quoted something like $3,000 to amend one.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

Viewing 13 posts - 1 through 13 (of 13 total)

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