Pull the pin now or wait?

Thanks, yes I probably can - will have a quick chat to my acct tomorrow

 

Terry_w assume I know nothing (probably true). I plan to sell, say, 4 cashflow neutral (at current interest rates) properties minimum with $300K gain each and I don't want to replace it with anything else.

I can contribute the max to super but that's capped at $25K per annum. Wife is not working at present and isn't a co owner of the properties in question. However, 2 of the properties earmarked are in a PTY company structure (we're both directors). The company exists only to own property - it doesn't trade in anything else.

Is prepaying interest (for next FY year) on the other existing, remaining properties the only/most effective way way to minimise CGT?

 

Everyone is different but early retirement is the goal for me. If you're already in a position to do it then go for it .

 

A company is a separate person to yourself and a separate tax payer. It will pay tax at 30% with no 50% discount (assuming it is not a trustee). If the company sells one property it could prepay interest on the other. The benefit of a company is that it can distribute this income in a later tax year by paying a dividend with franked credits.

Who are the shareholders of the company?

If you sell one you could prepay interest on other property loans you have and claim this interest upfront.

Any properties held under a discretionary trust?

 

We are the directors and shareholders.

So...I can sell one or two of the company owned properties and prepay the interest on teh rest of the properties(that are owned in our own names, my own name etc)?

But, you're also implying that I won't get the 50% CGT discount on the company owned properties and will pay 30% of the full brunt of CG?

No - have no trusts whatsoever.

 

No, the company won't get the 30% CGT discount, but you could get franked dividends from the company and get a credit from the tax already paid. In theory you could get the income from the sale out with no tax at all or maybe 47% tax.

It would be unusual not to have the trustee of a discretionary trust own the shares in the company. How did you come to use this unusual structure?

You could potentially prepay interest, but whether you should or not will depend on the situation.

I would be reluctant to sell more than one property initially.

 

This is a pretty big decision and I wonder whether it's a decision you're making based on some fear about the future?

Why don't you approach 4 or 5 accountants, like Terry_w, and ask them to come up with some scenarios, what will work best, not work, etc. I imagine you've worked incredibly hard to reach this point over many years and similarly, would imagine that this is a decision that you may not find the answer to just yet

Oh, and look at taking some leave from your job to help you consider what work you'd really be interested in doing/not doing

 

Yeah, I would look at one too start & you can make a choice maybe to not work, this will lower tax, as well as other methods, but I still think you should have been doing this planning about 3 months or so ago so you could have got one off last FY, it would then have been clearer what to do this FY.

I still think you need to sit down with all details with a few clued up people, unless all details are here, no one really knows.

 

PS I would not discount sitting down with a good broker too and seeing if there is a way to re finance some, or anything & maybe put straight on P&I with some fixed rates with a new 30 year term, it may lower enough to get you past any bump/s.

 

Received some great advice from others but you pretty much nailed how I feel and probably what I should do.

The reason I'm so uneducated on the options of selling, in what order, which should I sell etc is because my strategy for retirement involved a completely diff approach.

And the reason I'm stressed is because I went from never selling to decimating the portfolio within days - last thing I should do is be rash no matter what I do.

Does anyone on the forum with the required experience/expertise want to have a crack in charting the course to early retirement? Feel free to PM me.

 

Good ideas mate

 

Lying about at the beach or lounging around gets OLD very quickly.... If you want to quit your job just do it and become a full-time investor. That's still a job, but no clocking-in daily. You only need one good deal per year to make a living. Oh and btw, Accountants cannot give financial advice..period. Why do we believe an Accountant knows best for us?

 

I know a few apparently do it but getting finance without a business/job would be much harder one would think.

 

Yes, doing nothing would be boring, but I doubt anyone who is an investor would have nothing to do

Accountant, well, they help you do your tax, asking them about how much and when allows you to be your own financial advisor.

 

you can go RAMs lo doc, but the cut off is $1M for finance and you need to have an ABN number.

 

Most investors I know that achieved financial freedom at an early age have continued growing wealth via business, generally involving property.

Many doors open when you have choices and time to pursue other adventures whatever that is. Otherwise you can sleep all day if that suits... Whatever tickles your fancy that is what true wealth is, having a choice

 

Keep the lot
Buy some more cf+
Retire with your children looking after the portfolio and repaying you all the while supporting you like you did for them when they needed you.

 

Just to follow on from my initial thread, am grappling with working out the most tax efficient, sustainable early retirement scenario I can conjure up.

Structure wise, the properties we hold are all in private names and a shelf company (to hold property) - no trusts.

1. If we sell we incur a hefty amount of CGT - there are ways to minimise it but it will still be significant.
2. if we eradicate our debts and live on rents we'll be income taxed quite a bit - circa 25-30% of net rents
3. I don't love the idea of selling and investing the proceeds in LICs, shares etc - just look at ARG for example over the last 10 yrs. Unless you picked the moment, the returns are pretty underwhelming (dividends and share price). I believe in diversification to an extent but cashing out of property and going hard into shares is not the holy grail in my eyes as some have espoused on this site. Not for me anyway.
4. I still believe LOE (or my version of it ie one massive cashout prior to retiring) is the most tax attractive mode of retirement but that option is closed for the short to medium term....possibly forever thanks to APRA etc . So that's not doable.
5. I don't want to sell IPs, pay a ton of CGT and then buy higher yielding IPs (commercial, higher risk higher cashflow props). Goes against the goal of simplification .

Is there anything I haven't thought about or is the above pretty much it?

 

Transfer of shares in existing companies to trust?
Divert income to a bucket company.
Partial sales to related entities
Sale of the main residence tax free and moving into IP
etc

 

Tx Terry

- the company owned IPs are small in scheme of things. Most of it is in my name/wife's name, joint etc
- as far as diversion of income to a company, not sure how that works. Am only guessing that this might assist with the live on rents strategy principally if we don't go down the shares route
- partial sales to related entities...is that akin to selling to relatives??
- sale of main residence and moving to IP - won't work bc we currently rent