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Individual v Trust v Pty Ltd

Discussion in 'Legal Issues' started by bsteve, 13th Nov, 2015.

  1. bsteve

    bsteve Member

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    I can not find the basic information of pros and cons of Individual v Trust v Pty Ltd in this forum.
    I have some understanding from Terry_w's posts regarding joint and single name on title.

    My spouse and I are planning on buying the first IP.
    I'm thinking of buying the first couple of IPs under joint names to keep things simple. My question is at a later stage, can I add more IPs under a structure as well as maintaining the existing IPs in joint names?


    Thanks
     
  2. D.T.

    D.T. Adelaide Property Manager Business Member

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    So you mean just for IP buying and holding? Which states do you plan to buy in? Are either of you in jobs that are risk of being sued? Do both of you work, and will this continue?

    Depending on the above, what we do is max out land tax free threshold in one persons name, then the other person's land tax free threshold, then trust 1's, trust 2's, and so forth.

    You can certainly add more IP's to an existing trust structure.

    I've never used company for holding. I'd avoid joint names (depending on your answers to the above).
     
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  3. bsteve

    bsteve Member

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    Yes, buy and hold for at least 5 years in Victoria.
    Both are not in high risk jobs and will continue working.

    Already having a family trust, would it better to use it first before using one's name?
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Define 'better'!

    How confident are you that the terms of the trust are 'suitable'? What does the trust do now? Are you prepared to pay more land tax?
     
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  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes. The trustee can purchase property independantly of yourself - as long as finance can be obtained etc.
     
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  6. Ouga

    Ouga Well-Known Member

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    "Trying is the first step towards failure" Homer
    Keep it simple, use own name/joint name and save plenty of setting-up and ongoing fees you would get with trust structures. Do not over- complicate it: trusts are often hyped up, but especially as a first IP - I would not bother. This is only my opinion, everyone's circumstances are different.
     
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  7. D.T.

    D.T. Adelaide Property Manager Business Member

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    Agree wouldnt bother for first - get up to land tax threshold first.
    I'd avoid joint names though.
     
  8. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    bsteve - You can find such a response as its a complex area involving numerous issues that apply to you / spouse and requires personal advice that covers personal tax, asset protection, liability risks, etc.....

    Unless one / both of you are in a high risk occupation (ie obstetrics) its would be unusual to use a trust as this point and even then there could be land tax or stamp duty issues with that choice. Trusts may also hinder / complicate loans.
     
  9. RPI

    RPI Property Lawyer, Town Planner Business Member

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    Trusts are great if:
    1. you have income from other trusts to distribute to the one containing a negative income property; or
    2. you have reached your land tax threshold; or
    3. you are holding for a long time and wish to sell when your adult children are at university; or
    4. you are in a high risk job; or
    5. you hold other decent assets in your own name and you want to separate things out incase something goes bad in the future;and
    6. some others

    Often for a PAYG earner buying their first resi property the negatives outweigh the positives.
     
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  10. MTR

    MTR Well-Known Member Premium Member

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    Just a quick question, if you sell property in the Trust to you children I assume this would trigger Stamp duty again??

    Sorry back to thread.
     
  11. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Depends on the state and the terms. If a sale generally duty will apply.
     
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  12. MTR

    MTR Well-Known Member Premium Member

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    Thanks Terry
    I will be meeting with my accountant, this area is a maze. Will also look at ways of selling my developments to SMSF... anyway that's another story. All very interesting strategies, just need the right professional. Have you posted anything on this?

    Thanks
    MTR:)
     
  13. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Better speak to your lawyer as this is legal advice.

    It just so happens that I have posted on this from a WA perspective
    Legal Tip 54: Stamp Duty Transferring a property from a trustee to a Beneficiary in WA
     
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  14. MTR

    MTR Well-Known Member Premium Member

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  15. RPI

    RPI Property Lawyer, Town Planner Business Member

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    I meant not selling to the adult children so much as making use of their poor student income and therefore their large tax free threshold. So can sell to pay their uni fees (not such a great idea), sell, distribute the profit to them, they pay tax at their rate, deduct some living money and then kindly buy you an all expenses paid round the world trip to celebrate getting them off your hands (much better idea)
     
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  16. wogitalia

    wogitalia Well-Known Member

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    Agree with others that it's going to be specific to your circumstances and to seek specific advice.

    Generally if the property is going to be negatively geared and you don't have any other trusts or complicated setup then you'll be better in your own names where you can use the deduction now.

    Losses can get trapped in a trust. Company does not get the CGT discount so unless you're expecting little capital growth and/or have maxed out your own marginal rates and/or are going to call it development rather than investing a company doesn't make a lot of sense.

    But yeah, see your accountant and get a specific set of advice based on everything.
     
  17. MTR

    MTR Well-Known Member Premium Member

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    Haha. What a great idea, but BTW youngest will never leave home:)
     
  18. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    You could also just hand over control of the trust without the need to change title.
     
  19. hobo

    hobo Well-Known Member

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    Ohh, I'm sorry, is this a disability situation? Maybe look into the disability trust that's available in that instance? I know Terry_w has mentioned it before.
     
  20. MTR

    MTR Well-Known Member Premium Member

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    hehe, it's la dolce vita for some... :)