After listening to Ed Chan and Tony Melvin speak last night I would be interested to see if anyone here is a current client of theirs and is willing to share their experiences. They have a new Property Investors Trust (or PIT as it's become known) that claims to not be a special trust, yet be eligible for the land tax threshold here in NSW. There are also stamp duty benefits. More here on their sites www.knowledgecentre.net.au and www.chan-naylor.com.au
Thanks Jacque, Kay and I have realised that now is the time for us to set up some sort of structure to hold our investments in and are trying to figure out the optimal one. I couldn't make SIG last night as I'm at home sick as a dog, but would love to hear other people's input. I'm now torn between a PIT and a HDT, so would love to hear any pros/cons. Thanks, Michael.
MHO only........ PROS: If it's as good as it sounds, then I want to know more detail, especially about the deed itself. CONS: Relatively new- ATO have apparently challenged it and got through ok at this stage. But we all know tax laws can change Running costs of such a structure may appear not to be worthwhile. Eg; setting up a new PIT every time your land tax threshold is exhausted is costly- $1600 to set up trust. Another similar fee to set up company as trustee. Running costs per annum to manage each PIT $600-800. That's equivalent to about $4K per trust. Maximum land tax you pay on $352K is $5984 p/a, with a normal trust. I welcome discussion on it all, however
Hi Jacque, How did you come up with running costs of $4k per year? It looks like a setup cost of $1600 (how does this compare to a normal HDT?), then ongoing $600 to $800 per year (highly dependant on whats going on in your trust)... I have one of these trusts - created just before xmas. I don't have a corporate trustee, just myself which was what chan&naylor recommended for my situation. Unless your in a highly litigious job is it worth having a corporate trustee? I guess if I need one in the future, I can just swap one in whenever I need it. My understanding is that you setup a PIT and if your going to have a couple of properties then thats it. However if your going to buy many in the trust then better to create what they call "Property Trusts" underneath the PIT. The individual property trusts were much less than the PIT setup cost but I can't remember what it was now... As for C&N as accountants - I think they are great. But then I can only compare to my previous accountant who was nothing short of a ******! And an expensive one... Jason.
Yes, Jason, we use a corp trustee for asset protection purposes. We have good reason Setting up the company adds approx $1300 to the bill, plus the ASIC annual fee of $212. Hope that explains it better for you. Who do you use at C&N, if you don't mind me asking, and what benefits (aside from the PIT) have you found?
Ken is the guy I deal with directly and setup the trust for me. Their service is outstanding compared to my previous accountant who used to make mistakes all over the place, then charge me enormous rates to fix them. He also used to charge about $50 to say yes in a one line email question. C&N don't charge for 5 minute type phone calls or emails which is great for me because allot of my questions are those really basic sort of things for them like "I'm buying these shares in what name/structure do I put them in", or "How do I do this and that in MYOB", etc. They are also more pro-active trying to figure out the best way for me to do things whereas previous accountant just copied my expense entries out of myob and that was about it. C&N should have me on the payroll I think. (Maybe I just had a really bad experience so now any accountant looks )good?!?
We dealt with a couple of accountants in the past and were monumentally stuffed around. Our last HDT was set up (expertly I might add) by NickM (Nick Moustacas) - and similar to the jscott's experiences with C&N, Nick and his team don't send you a bill for 5 minute questions, in fact he had the patience of a Saint (how saintly he actually is, I'm not sure - but he is one of the few accountants who can say he's been shot, from all those that have been threatened with it ! ). We have a corporate trustee due to my exposure via my company, but its otherwise pretty 'vanilla' - but it follows the successful format Nick is known for. However, prior to meeting Nick we found there are plenty of so-called trust experts out there who don't have a clue - so my only advice would be to go with referrals from sources you trust. Cheers Carl
off topic Now that's gotta be one hell of a story surely? Nick you're just gonna have to stop charging the greek mafia so much...it should be a privilege to "do" their books!
It wasn't me ... NickM mentioned it at the beginning of one of his presentations, as a life changing moment. Kind of makes you think worrying about the numbers isn't quite as important as living it all to the fullest ;-)
Hi Glebe My mistake- I have reread my original post and should not have added that p/a. My apologies for the confusion caused I have rectified that post now. I meant to merely quote the approximate cost of setting up a new trust (with a company as corporate trustee) per year, with the appropriate running costs. For an investor who holds a large portfolio, and in order to qualify for the land tax threshold under this PIT structure, you could only hold enough property in each PIT under the current $352K threshold. This would require larger investors to hold perhaps one or two properties per PIT to minimize their land tax bills. Not an unlikely scenario, then, to be setting up new trusts every time you invest in another property. Because a different entity holds each property/properties they are deemed as separate according to the ATO. If you only set up one PIT, however, the annual running costs (with the company) would be around min $1K mark, depending on the complexity and setup of your individual deed and circumstances. This would widely vary as well with which accountant you use.
deep and meaningful Spot on Carl. We often get swept away with out daily routines and forget about the importance of life. Why do we do it ? Sometimes people forget to live. We are not bullet proof (i guess i could almost say I am !) and whilst it is important to plan for our retirement you never know what is around the corner. Nigel, let me know when you are free for a cuppa and i will fill you in on the details.
I dont know what this really means. The ATO dont really challenge structures, they challenge the way they are used. Just because 1 client gets through an audit it may not mean the next one will. Re Land tax - if it works then great ! but i am not prepared to make further comment without examining the deed. The pricing seems reasonable if it can also operate as a HDT and capital gains can be distributed in a discretionary manner NickM
Ppor I follow the sort of 'standard' structure (I think) : PPOR in wife's name Business in Pty Ltd company (me as Director) IP's in HDT with Corporate Trustee (me as Director, both as beneficiaries) SMSF with both wife and I as Trustees and members I guess the idea would be keep your PPOR out of any Trust that has IP's because of the Asset protection angle Cheers Carl
Is this move for asset protection aswell? Because you are a director of a company which could run into trouble? Again, is the need for the Corporate Trustee because you are a director of a company? If i recall correctly from a weekend NavraInvest seminar i went to that you spoke at, this was so that your wife couldnt kick you out of your own home as you own a bit of the PPOR! Is the other 99% held in trust or in a personal name if you dont mind me asking?
the other 99% is in the wife's name. if it was held in a trust land tax and CGT would be a problem cheers Nick
