QLD Land Tax using multiple family trusts

Discussion in 'Investment Strategy' started by Ellie009, 13th Mar, 2021.

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  1. Ellie009

    Ellie009 Member

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    Hi Everyone!

    Pleased to have my first post here!

    We have an IP in QLD under family trust (me and husband) name which has land value of $600k, which causes us to pay $5k land tax a year. Can we set up another family trust using a relative (me and my sister) to split the land tax and avoid it? What is the pros and cons? Can we have different trusts with same trustees and beneficiaries?

    In general, how can we reduce land tax while purchasing under trust name?

    Thanks for your replies!
    Ellie:)
     
  2. Terry_w

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

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    Yes.
    Costs would be excessive though. Duty and cgt and legals and new loans
     
  3. RPI

    RPI SDA Provider, Town Planner, Former Property Lawyer

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    Buying in sep discretionary trusts in QLD is very common amongst my clients. I have done some restructuring where people have large onging and tax bills, like $50k a year large. But bills gotta be big to warrant all the CGT, stamps etc to restructure what you already have
     
  4. kierank

    kierank Well-Known Member

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    Are these trusts with individual/personal trustees? Not corporate trustees?
     
  5. thunderstrike888

    thunderstrike888 Well-Known Member

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    As others have said land tax and loan structuring is always a complicated one.

    You can split the loans up but that would mean CGT/Stamp duties etc....if you were to do this from day 1 and buy houses under a different trust/company there is also borrowing constraints like some lenders only allowing 70% or lower LVR.

    I believe land tax thresholds are also different for trusts/individuals as well.

    Buying under an individuals name is often the easiest, but with that comes higher land tax (due to being 1 single entity) but potentially easier to borrow higher LVRs. Its a fine line.

    I get a hefty land tax bill each year. Yes its a tax writeoff but it gets expensive. I just think of it as a cost to do business. Every business have running costs just think of land tax as a running cost of this Real estate business.
     
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  6. jaybean

    jaybean Well-Known Member

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    At what $ point do you think it's worth doing?

    Mine is only about $11-12k at the moment, I figure after the boom it might be $15-20. Roughly when should I pull that trigger?
     
  7. Terry_w

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

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    Loans have no affect on CGT or stamp duty - or land tax. You might have meant to say 'ownership'?
     
  8. Terry_w

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

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    Do you mean restructuring to save land tax? I generally think 5 years is a good time frame - the cost of the transaction should be recouped within 5 years.

    but keep in mind there is much to consider other than land tax.
     
  9. thunderstrike888

    thunderstrike888 Well-Known Member

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    Yes ownership. Should have worded that better
     
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  10. Ellie009

    Ellie009 Member

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    There is no loan on this property, so to me the only cost seems to be setting up a new trust. Can you please tell me more about cgt and duty you mentioned?
     
  11. Terry_w

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

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    Cgt as if it was a sale and stamp duty as if it was a purchase. Both at market vals
     
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  12. thunderstrike888

    thunderstrike888 Well-Known Member

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    You cant just transfer names/ownership of properties. It doesn't work like that. There are fees and costs associated with transferring titles as above Terrry mentioned.
     
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  13. Terry_w

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

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    Even if title remains with the same trustee but held under a new trust it would still trigger CGT and duty - no transfer but a declaration of trust.
     
  14. Ellie009

    Ellie009 Member

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    Hi, This is corporate trust and we are directors of the trust.
     
  15. Terry_w

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

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    Directors of the company, not trust.
     
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  16. Ellie009

    Ellie009 Member

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    Yes, you are right..
    Just want to know the tricks around this.. We have two options:

    Keeping the ownership under the trust and paying $5k annually (increases)
    Paying the costs of transfer to the second trust and saving land tax for the future.

    The costs include:
    CGT (After two years, the market value of the house is not increased much, so can be negligible)
    Stamp Duty? How much? Full one?
    Setting up a new trust
    Accountant fees of the trust in coming years

    Am I missing any other costs?
     
  17. Terry_w

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

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    Mortgage discharge and registration costs
    loan application fees
    new loan based on new serviceability
    new trustee too

    consider also the possibility of changes to the land tax laws. You might do the transfer, spent a lot of money and then they change the laws to start aggregating trusts.
     
  18. Ellie009

    Ellie009 Member

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    Thanks Terry, this property does not have any loan. So nothing related to the loan would be applicable, in fact that is the reason we are considering to change the ownership.. But the chance of changing the laws is something to think about..

    Am I correct to say currently there is no restriction on having two trusts with the same trustees and beneficiaries? So every one can structure their properties by having few trusts and paying less LT?
     
  19. Terry_w

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

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    How did the trust pay for the property and how will the new trust acquire it?

    Yes there are restriction, land tax ones, on trusts with the same trustees and beneficiaries.

    You should seek legal advice.
     
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  20. Ellie009

    Ellie009 Member

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    We pay the extra costs as directors loan.

    Can you please direct me to the section or act that clarifies theses restrictions?