All Topics / Legal & Accounting / Ways to structure business of buying, renovating and selling properties in Trust

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  • Profile photo of agmagm
    Participant
    @agm
    Join Date: 2013
    Post Count: 1

    Your insight would be appreciated based on our goals and understanding.
    We are interested in getting into business of buying, than renovating and selling the property within no more than 6 months of purchase. We got different advises from different accountants in regards to correct ways to structure it.
    Our current accountant suggested to create a company as a trustee within Discretionary Trust if we operate as a business. We will be borrowing money from a bank to start our projects. We also found a right property with great potential to produce positive income.
    What would be your opinion on this type of setup? Is there any capital gain tax, land tax or any fees and if so how much? We believe there is no Capital Gain Tax as this is run as a business.
    1. What happens if we decide to keep some properties for more than 12 months and have rentals?
    2. What happens if we realize that this business is not for us and we do not want to do it anymore? What happens with money and properties in the trust?
    3. Is it better to start under your own name/abn and if business picks up than create DT and start buying properties under it?
    4. What are the ongoing fees for maintaining company and trust?

    Thanks,
    Aleks

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    1. They rent will be taxable as per normal
    2. You move on. Changing ownership would be costly.
    3. depends
    4. nil for a trust. ASIC fee for a company $243 per year.

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

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of CatalystCatalyst
    Participant
    @catalyst
    Join Date: 2008
    Post Count: 1,404

    You need to decide the purpose of the property BEFORE you buy it. Not, I may do this, I may do that. Be specific about why you are buying
    THAT particular property. Some may be to rent out, others may be to sell.

    It’s purpose will determine what entity to buy it in.

    For example- if I want to buy a property to rent out I may put it in both names (husband and wife) as in the next 3 years neither of us will be working, so we want to share the incvome.

    If I buy a property now to reno and sell we will buy it in my husbands name as he is not working so less CGT to pay.

    Profile photo of renov8rrenov8r
    Participant
    @renov8r
    Join Date: 2014
    Post Count: 6

    Hey Aleks,
    I am in the process of doing something similar.
    I would suggest if you are serious about getting into property investing deside on what exactly you want to do. Then write out your own business plan. From the ideas you have and add on to it each week to improve your knowledge an to keep you motivated. This will put your goals on paper and you will be able to see how to get from A to B . I my self have set up a business and loan structure, so all expenses will be tax deductible. Realestate you sell will be taxed as income tax. Do a lot of research, ask questions and due diligence is key. I am still only novice at this but I hope this helps some what.

    Sincerely,
    Keirin S

    Profile photo of ClintClint
    Participant
    @clinth
    Join Date: 2014
    Post Count: 6

    Hi Aleks

    I’m in a similar situation and have found that the best possible direction to take now is hire the best possible team by being honest and clear to them about what you want. They are going to have a collective knowledge that should continue to be insightful and incredibly helpful. Ask for recommendations for the team and qualify them. This method of figuring out obstacles has helped us a lot.

    Good look :)

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