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Is transfer of title (hence stamp duty) neccessary?

Discussion in 'Accounting, Tax & Legal' started by dttsou, 30th Mar, 2010.

  1. dttsou

    dttsou New Member

    Joined:
    29th Mar, 2010
    Posts:
    2
    Location:
    Perth, WA
    Is transfer of title (hence stamp duty) necessary?

    Hi All,

    Hoping someone can shed some light here. I have the current situation:

    - Looking into setting up a trust (lets call it TrustXYZ) which invests in properties and makes a profit by collecting rent, then distributing profit to various beneficiaries
    - Already have a property (lets call it PropertyA) which is registered under my name (not a company nor a trust)

    After some initial reading and trying to understand it all, it appeared that the biggest barrier to setting up the above structure is that I have to transfer the ownership of PropertyA to TrustXYZ, which will give me a nice whack of CGT and some stamp duty for dessert.

    However, I read under the "Property Investments" subsection of the Trust Magic that "regardless of what type of property you buy, the property title will show the name of the trustee or trustee company with no reference to the trust whatsoever".

    So does this mean that if I now create a new discretionary trust with me (and MAYBE[?] a PtyLtd for more flexibility down the track) as the trustees, the law can just automatically recognise PropertyA as belonging to TrustXYZ without there having a need for any type of "settlement" taking place?

    Many thanks in advance.

    Dean
     
  2. jrc77

    jrc77 Well-Known Member

    Joined:
    26th May, 2008
    Posts:
    147
    Don't think you can avoid the stamp duty on transferring the title. I would have thought the new title should be in the name of "TrusteeName ATF TrustName".

    Also don't forget that with the title in the name of the trust there may be land tax payable on the property (depending on which state it is in there can be zero land tax free threshold for the trust).

    Regards,

    Jason
     
  3. Superman

    Superman Well-Known Member

    Joined:
    6th Nov, 2007
    Posts:
    343
    Location:
    Gold Coast, QLD
    Stamp duty is the bane of most property investors and their advisors.

    There will also be a beneficial change of ownership hence it will be a CGT event with CGT payable.

    Maybe just use the trust for future investment property purchases moving forward.

    SM
     
  4. dttsou

    dttsou New Member

    Joined:
    29th Mar, 2010
    Posts:
    2
    Location:
    Perth, WA
    Thanks SM and Jason. Seems like transferring the property title is a no goer (the CGT is too large).

    However, because the property is most likely going to be positively geared, I would like to somehow make sure that I can distribute this income to my partner, other family members and perhaps a trading company if I run out of options. It would also be good to be able to make use of some tax deduction advantages.

    The situation is as follows at the moment:
    - The land is held on my name;
    - Me and my partner have all the cash necessary to build a house (we are still just talking with builders at the moment, no contracts yet)

    Is the following construction possible?
    - I set up a discretionary trust
    - I lend my land to the trust
    - Me and my partner lend the cash for building the house to the trust
    - The trust "builds and owns" the house on the leased land
    - The trust rents the house out, and deducts depreciation and other investment related expenses from the income, and distributes the rest to beneficiaries

    I realise that there is no asset protection doing it like this, but would this at least give us some tax benefits without the CGT and stamp duty costs?

    Thanks,
    Dean