hi I’m Sydney based and looking to buy my first of a few ip’s in brisbane all will be sub $400k hopefully, couple for CG & few for CF, seeing as I’ll eventually be over the land tax threshold in my personal name would it be best to buy in trust from the get go ? I’m looking to buy future development site (5-6 townhouse sites) which once I build I’ll sell a couple reduce my debt and hold a couple for CF. What are your thoughts ?
Investigate what the land tax thresholds for trusts (with corporate trustees) are, as well as the Brisbane City Council rates are. Compare this with what you'd pay if it's held in your own name. Also factor in an allowance for future growth on the property values. Between these two expenses, I loose about a quarter of my rental income on the properties held in a trust. I do get tax flexibility (more than most people due to my circumstances) and it's nice to have some asset protection (which I've never needed so far), but it's a high price to pay. Future QLD properties will be bought in mine or my wife's names. For me, the cost/benefit just isn't there.
Maybe yes, maybe no. My thoughts would be to get legal and tax advice on the dev AND the structure. Then spend some time and money to model the financial impacts. Then worry about land tax.
Get some legal advice. There is a lot more to consider other than land tax, and this is especially the case where you plan to do a development.
$600k for individuals $350k for trusts and other non-individuals Land tax can make a big difference and can be a deciding factor. But if you don't have the ability to distribute income from another trust then a negatively geared property stuck in a trust will not let you access the tax reductions than if it was in your own name. If you intend selling and you and your spouse are on different incomes (or will be - eg someone stays home to raise kids) then the lower tax paid at time of sale can offset losses. Generally, for those in low risk professions buying in their own names until they approach a land tax threshold can make a lot of sense. You can still utilise a trust structure to to protect the majority of your equity without owning the property within a trust. Whether that is right for you needs specific advice.
You really need to sit down with your Accountant and at the same time your broker or banker and discuss the tax implications and also how structures will impact your lender options and future serviceability. This is really important as it will be costly to change entities and structures post settlement. You should have a game plan for not just this purchase but also subsequent purchases to the extend that you know which lender to use for each purchase.
I think it is best to get legal advice from a lawyer - structuring is mostly legal advice as it concerns ownership of property, trusts, company law, asset protection, land tax, estate planning - none of which an accountant can advise on.
Thank you terry would you mind delving into that abit so I can know what to ask and look out for please.
Well, there are land tax income tax CGT stamp duty on restructures estate planning on - incapacity - death control asset protection on - bankruptcy outside of project - death - incapacity - family law - insolvency of asset holding entity - social security - GST - debt recycling and strategies involving any of and combining any of the above.
