Join Australia's most dynamic and respected property investment community

Investment Structure

Discussion in 'Accounting & Tax' started by FirstTimeBuyer, 22nd Jun, 2015.

  1. FirstTimeBuyer

    FirstTimeBuyer Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    88
    Location:
    Sydney
    Hi PCers,

    I'm looking to purchase my first IP in Brisbane in the next 1-3 months. With a long term vision in mind of building a portfolio for the next 30 years, is it worthwhile setting up a trust for this purchase now?

    My understanding is that transferring a property into a trust would incur stamp duty fees. If in 10 years or so years down the track I wanted to transfer X number of properties into a trust, it would be an expensive transition. Yet setting up one now seems to have some drawbacks also - not being able to negative gear which may hurt cashflow, costs in setting one up etc.

    Thanks!
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,979
    Location:
    Sydney
    Last edited: 22nd Jun, 2015
  3. FirstTimeBuyer

    FirstTimeBuyer Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    88
    Location:
    Sydney
    Thanks Terry. Have a question for you on that thread.
     
  4. RPI

    RPI Property Lawyer, Town Planner Business Member

    Joined:
    19th Jun, 2015
    Posts:
    712
    Location:
    Brisbane
    We call it a transfer to your trust but effectively it is a sale by you and a purchase by the trust. Entry and exit costs can be huge. DT's in QLD are the most common vehicle next to personal names. $350k threshold for land duty, $600k for personal. I have some clients who setup 2 trusts to buy 1 property, unfortunately you need to have different trustees (normally company) which makes it expensive, but if you are look at decent year on year land tax costs it can be worth it.

    An option some of my clients use is to have it half owned in personal name and half owned in DT. You can negatively gear half of it, distribute half of the profit on sale (or distribute half of positive cashflow later on to lower paid family members). It is not the best of both worlds but allows flexibility. Of course the 50% in personal names is not great for asset protection but if you have a full structure in place it can is not bad.
     
  5. FirstTimeBuyer

    FirstTimeBuyer Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    88
    Location:
    Sydney
    Thanks RPI.

    It seems like the property band I'm looking to purchase in, and the setup and yearly fees associated with maintaining a Trust might not be worth it for me with the first purchase.

    Here's a reference I found back from SS around costs: http://somersoft.com/forums/showthread.php?t=81098
     
  6. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,374
    Location:
    Sydney
    Costs are one element of the issue.

    Asset protection may be a relevant factors for some higher risk occupations too. However, just owning a property in a trust doesn't in itself give asset protection. Many people consider a trust to give some degree of flexibility in later years (ie change beneficial interest % etc) however with QLD property the indirect stamp duty problem tends to make this not work as well as other states.

    If it ins QLD I would tend to agree that a trust isn't relevant unless you have some pressing asset risks such asa high risk occupation (gyno, neuorosurgeon etc) or a land tax issue
     
    Last edited: 24th Jun, 2015
  7. FirstTimeBuyer

    FirstTimeBuyer Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    88
    Location:
    Sydney
    Cheers Paul!