How to minimise tax with high income producing assets?

Discussion in 'Accounting & Tax' started by chhola, 28th May, 2017.

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  1. chhola

    chhola Member

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    Hi, I own a block of units under my name (a mistake) and it's generating around 50k income (after expenses). This adds up to my salary so I ended up with a total income of around 150k+. This puts me into the second highest tax rate bracket.

    I'd like to know what are the things I can do/I should do now to lower my tax rate? One way that I can think of is to transfer the title into a family trust, I'd still have to pay stamp duty on it, but that's something that I can't avoid at this stage, it will help in the long term. Do you think it's worth doing that?

    If you can think of anything else, please advise.

    Thanks!
     
  2. splatters

    splatters Well-Known Member

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    why do you say it's a mistake? that's an amazing asset!! i would either work less, or get a strong growth property next which is negatively geared to offset some of the income
     
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  3. chhola

    chhola Member

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    A mistake because I would have bought it under a family trust if I have known, that way I'd be able to distribute the income into different beneficiaries, therefore, lowering my tax rate.
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    How much extra land tax would you have to pay if owned in a trust?
     
  5. chhola

    chhola Member

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    I believe none (it would be the same as now) since this is a commercial building. Correct me if I'm wrong.
     
  6. datto

    datto Well-Known Member

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    Land tax | Office of State Revenue

    You may have to pay land tax on:

    • vacant land, including vacant rural land
    • land where a house, residential unit or flat has been built
    • a holiday home
    • an investment property or properties
    • company title units
    • residential, commercial or industrial units, including car spaces
    • commercial properties, including factories, shops and warehouses
    • land leased from state or local government.
     
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  7. Trainee

    Trainee Well-Known Member

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    NSW individual land tax threshold is 549k. Trust threshold is zero. Unless you have other Sydney property that takes you over the threshold anyway, youll have to pay more land tax in a trust. And capital gains tax on transfer. Not saying it's a bad move to sell to a trust, but there are other costs.
     
  8. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Is it a block of units?

    What state?
     
  9. Scott No Mates

    Scott No Mates Well-Known Member

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    You will also pay CGT depending upon when you acquired the property.

    Commercial buildings aren't exempt from land tax AFAIK.
     
  10. thesuperman

    thesuperman Well-Known Member

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    I thought you said it was a block of units and now you are saying it's a commercial building. Are you saying "commercial" because banks treat 4+unit blocks as commercial under their lending criteria therefore you (wrongly) believe it's a commercial building?

    Lowering tax - can be done by giving away large amounts to charities then I believe it's a tax deduction for the amount given. Buying a hugely negative geared property is another. Share trading losses as a share trader is another. Making some income losses in other ways, etc..
     
    Last edited: 28th May, 2017
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  11. thesuperman

    thesuperman Well-Known Member

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    It is if it's a commercial building that is classified as a land tax exempt property for that particular type of property :)
     
  12. Scott No Mates

    Scott No Mates Well-Known Member

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    Can you refer to a Section of the Act as I haven't come across it previously.
     
  13. chhola

    chhola Member

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    I'd like to know more about land tax in a trust, can you point me to the right information please?

    What if the sell price is the same as the purchased price? Then I don't pay CGT?


    This is a block of units in Sydney.


    I'm not saying that, what I meant was that I would pay the same rate as I'm now (currently paying land tax already).
     
  14. chhola

    chhola Member

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    Sorry for the confusion, it's a block of units with a commercial loan.
     
  15. datto

    datto Well-Known Member

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    Some properties are exempt eg those used by not for profit organisations etc etc:

    Land tax | Office of State Revenue
     
  16. Trainee

    Trainee Well-Known Member

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    Trusts | Office of State Revenue

    Sell price has to be at market value.

    Example: the block is the only NSW asset you own. Land value is 1m. Currently you pay 1.6% on the excess over 549k. Put it in a trust, you pay 1.6% on the whole 1m.
     
  17. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    And that is about $8,000 pa difference.
     
  18. Scott No Mates

    Scott No Mates Well-Known Member

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    The OP doesn't sound like a charity case ;)
     
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  19. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    If transferring To a trust stamp duty and cgt will be levied at market value. New loans and mortgages needed too?
     
  20. chhola

    chhola Member

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    Got it! Thanks Trainee!

    If the land is owned by me AND a trust, says 50/50, would I pay for the excess or the whole?