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Any point in setting up a trust for first home buyer?

Discussion in 'Legal Issues' started by sonofthewest, 15th Jul, 2015.

  1. sonofthewest

    sonofthewest Active Member

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    I'm vaguely aware of the taxation benefits that come with setting up a trust to own multiple properties, but is there any benefit in creating one for your first IP?
     
  2. D.T.

    D.T. Adelaide Property Manager Business Member

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    Whether its 1st IP or 10th, it doesn't change whether a trust is useful for you or not.

    Plan ahead - do you plan on utilising land tax thresholds in the state of your chosen purchase? Do you need asset protection? Do you need to divvy up tax responsibility with others?
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    It depends why you are setting up a trust. A trust is a device in which a trustee holds assets for the benefits of others. Good for family situations. but there are other ways to benefit family.

    So why do you want to set up a trust?
     
  4. sonofthewest

    sonofthewest Active Member

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    For now I'd do it purely for the purpose of tax reduction (if that's actually possible), but the ability to protect family assets will be useful once I have children.

    I'm definitely not going to rush into such an arrangement (not without personal legal advice), but I thought I'd see what more knowledgeable people have to say about the benefits/drawbacks of trusts.
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Perhaps do some excel calcs and see what the tax situation will be like for the sample property you are looking at.

    Keep in mind most property will be running at a loss and losses will be trapped in a trust. Also consider the land tax situation in NSW.

    Then consider a fixed unit trust.
     
  6. sonofthewest

    sonofthewest Active Member

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    Great, I'll have a play around with the numbers and see what comes of it. I'll actually be buying in Victoria rather than NSW - I'm not sure whether there's any major differences between the states, so I'll do some research in the meantime
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes huge differences in land tax between the state. A trust will pay more land tax than an individual in Vic.

    Also consider the VIC stamp duty laws allows transfers between spouses with no duty. This can allow for various strategies down the track.
     
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    And when you say first home buyer are you talking about an investment property or an owner occupied?
     
  9. sonofthewest

    sonofthewest Active Member

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    It'll initially be an IP as I'm working in Sydney, with the possibility of making it my PPOR once I return to Melbourne in a few years.
     
  10. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Not much point in getting a main residence in a trust as the CGT exemption cannot apply.

    However there are other ways to use a trust for asset protection and tax savings - related party lending.
     
  11. sonofthewest

    sonofthewest Active Member

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    Great, thanks for giving me a head start into the possibilities of trusts! I'll do my own research and come back with more daft questions once I know where I'm going with the whole thing :)
     
  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    see my tips under the legal forum here too.
     
  13. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    That's easier to say than do. You cant squirrel assets into a trust to defeat a spouse and claim the assets are there for the kids. The Family Court cares zero for the perceived asset protection benefits of trusts.
     
  14. thesuperman

    thesuperman Well-Known Member

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    I thought that assets acquired in a trust before getting married to someone would be safe from something like an upcoming spouse trying to bleed you dry. Am I wrong with this?
     
  15. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Nope.

    See Kennon v Spry.