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Setup a discretionary trust

Discussion in 'Legal Issues' started by htopg, 21st Sep, 2015.

  1. htopg

    htopg Well-Known Member

    23rd Jun, 2015
    I have reached NSW land tax threshold.
    I will need to pay land tax if I buy more properties in NSW.

    Is it a reasonable thinking that as discretionary trust has no land tax threshold in NSW and I have reached land tax threshold in NSW, it is better to setup a discretionary trust to buy more properties in NSW?

    By doing so, I can benefit from
    1. income distribution to partner and kids (once they turn 18)
    2. capital gain distribution to partner and kids (once they turn 18)
    3. asset protection, etc according to TerryW

    How will buying properties in discretionary trust affect my borrowing power?

    My rough calculation:
    1. If buy 2 more properties in NSW under discretionary trust
    discretionary trust setup $2500
    audit cost $1000 per year
    land tax $6400 (~ $200,000 x 1.6% x 2) per year

    2. If buy 2 more properties in NSW under my name
    land tax $6400 (~ $200,000 x 1.6% x 2) per year

    After 20 years, buying in discretionary trust will cost $2500 + $1000 x 20 = $22,500
    But the benefit in income distribution and capital gain distribution outweighs $22,500, is it correct?

    Any comments or corrections or suggestions?

    Thanks in advance.
  2. D.T.

    D.T. Adelaide Property Manager Business Member

    13th Jun, 2015
    Adelaide, SA

    My last discretionary trust including corporate trustee was ~$1000 from a South Australian lawyer. Maybe they're cheaper here than Sydney.

    Not sure what you mean by audit costs. The corporate trustee has an annual review fee payable to ASIC of ~$246. Your accountant also needs to perform a separate tax return on the trust and whatever his rate might be. I think this throws your comparison figures off.

    I'm uncertain how land tax is calculated for NSW trusts though, so will leave that one to the locals.