I am just wondering if using subsidiary companies to hold multiply real estate assets is used at all for asset protection, and if its a good idea.
Example of a possible structure – Main Ultimate holding company shares are own by a trust, and that company has various subsidiary companies which hold separate real estate assets. All accounting and tax reporting is done by Ultimate company.
Im thinking is this a way to minimize accounting and a way to contain risk of each property to only its subsidiary company?
It’s possible, but isn’t a very common setup. Company held property does not receive the 50% CGT discount, which is no doubt the main reason why most don’t bother with a company ownership structure.
For asset protection, it’s generally a trust with corporate trustee. CGT benefits remain, asset protection and a few other benefits dependent on the type of trust used.
As always, get specific advice from lawyer/accountant.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
Personally I do not care about the 50% discount anymore because it may not be around for that much longer, besides I am sick of using trusts with the ever changing tax rules and whatever else.
Have been reading up about using a ultimate holding company with subsidiaries today, but its unclear if a liability can exist to the ultimate holding company from a subsidiary company holding the real estate………….for example – somebody sues the subsidiary company for slipping over on its driveway and wins, but the real estate is mortgaged through a loan from the ultimate holding company, thus the subsidiary technically has no assets…….but can they get at the ultimate holding company?
Yes this is fairly common and it is a way to get an extra land tax threshold in some states (once).
The ultimate holding company is just a shareholder so it will be difficult for this to be dragged into any litigation if it does not own the asset where the slip occurred and where it has not contract with a tenant. However loan agreements and transactions have to be above board and done properly.
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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