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Property Investing in a trust - Landtax

Discussion in 'Real Estate' started by TakeStock, 18th Aug, 2005.

  1. TakeStock

    TakeStock Well-Known Member

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    I know the obvious advantages of owning property in a trust structure include asset protection and possibly tax advantages, however, given that there is no land tax free threshold for trust held properties, I sometimes wonder if it is worth it. I have recently received land tax bills for a couple of NSW properties held through a trust and nearly keeled over! The land tax is very significant.

    What do others think about this?
     
  2. Nigel Ward

    Nigel Ward Team InvestEd

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    I agree it's an unfair impost.

    Unfortunately it's the price of the protection and flexiblity which trusts provide.

    Similarly, the fact that stamp duty is levied on purchase of real estate (and at such a high rate) but no longer on listed securities is perhaps the "price" of being able to gear up to say 97% (with LMI) against property whereas you can gear only to 70-75% max with shares as security for a margin loan.

    Cheers
     
  3. Bob

    Bob Well-Known Member

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    Trust structure to personal names

    I agree I don't think it is worth it. I currently have my PPOR in a trust structure with a corporate trustee. It hasn't been thru a tax assessment as yet and due to a number of reasons I will transfer the title back to personal names. I am frightened how much this is going to cost me, stamp duty (here in Sydney), legal costs etc....

    Bob
     
  4. NickM

    NickM Co-founder Staff Member

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    Dear Bob
    depending on your circumstances you may have some options.
    Eg, keeping the property and renting out to a 3rd party, sell half to you or your spouse ?

    In order to recommend a trust to own a PPOR you have to be in a very specific position where asset protection is crucial. You must also be prepared to wear the costs of land tax and CGT as they arise in the future.

    For IP's - the cost must be factored into your cashflow. If you already own properties in individual names and absorbed the threshold then a trust will pay the same rate as an individual.

    hope this helps
    NickM
     
  5. TakeStock

    TakeStock Well-Known Member

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    Actually, I never stopped to consider this. Good point.
    Thanks Nick.
     
  6. Bob

    Bob Well-Known Member

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    Thanks Nick,

    If I transfer the property either to myself or spouse or both, what would be the Stamp duty implications here in Sydney???

    Thanks

    Bob
     
  7. NickM

    NickM Co-founder Staff Member

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    Hi Bob
    depends on the value of the property

    a calculator can be found on www.osr.nsw.gov.au

    REGARDS
    NickM
     
  8. TryHard

    TryHard Well-Known Member

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    Land tax

    Pardon my ignorance, blokes, but what % is Land Tax ? I gather it varies state to state ? I had a feeling it cut in after some $ value based on land value, does that vary state to state too ?

    Interesting point raised in this thread :) thanks !
    Carl
     
    Last edited by a moderator: 22nd Aug, 2005
  9. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Sim' puts land tax calculators on the to-do list for the site
     
  10. Nigel Ward

    Nigel Ward Team InvestEd

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    There's a land tax calculator on the NSW OSR website Nick quoted. From memory there's also one you can download on the Qld OSR website.

    Cheers
     
  11. Jacque

    Jacque Team InvestEd

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  12. NickM

    NickM Co-founder Staff Member

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    I am currently compiling a land tax matrix which will cover all states and provide a snapshot of land tax implications for trusts and individuals.

    Hope to have it ready very soon
     
  13. TryHard

    TryHard Well-Known Member

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    Thanks Nick

    Great idea Nick thanks :)

    This thread also made me at least go and understand how Land tax was applied - and after comparing individuals and trusts at http://www.osr.qld.gov.au/calculators/LTAXEstimator.htm I can see what TakeStock meant !

    I guess it means mutiple trusts each with less than $300K in unimproved land value would be an option ?

    Oh for the simple days of claiming $299 of unreceipted expenses and receiving a $20 tax refund :) then spending it on beer the day the cheque arrived.
     
  14. Jacque

    Jacque Team InvestEd

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    Hi TryHard,

    Having multiple trusts will not help you, I'm afraid, as trusts have NO THRESHOLD at all. This means they pay 1.7% land tax on the full value of the land. In other words, if your property is worth $500K with a land value of $300K then you are up for 1.7% x $300K = a whopping $5,100 per yr.
    It really sucks, actually :(
    It's at this time, however, that a cold beer would at least take the edge off the pain that the bill brings you :)
     
  15. TryHard

    TryHard Well-Known Member

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    Trusts ?

    Hi Jacque

    I read this on the QLD OSR site -

    "Land owned by a company, trustee or absentee
    A company, trustee (including trustee/s of deceased estates), or an absentee, may be liable for land tax if the total unimproved value of the freehold land owned as at 30 June 2005 is equal to or greater than $300,000."

    Am I misunderstanding the terminology ? (I'm gonna have that beer anyway - it can't possibly hurt ;-) )

    Cheers
    Carl
     
  16. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Remember that land tax is state based - so what applies in NSW (ie no threshold for trusts) might not apply in other states.
     
  17. Jacque

    Jacque Team InvestEd

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    My sincere apologies, Carl. I was referring to NSW rates, not QLD. :eek:
    I'm just so used to bills coming from the good old NSW OSR these days!
    Yes, of course there is the threshold for both individuals and trusts in good old Qld.
    Have another beer for me, will you?! :D
     
  18. TryHard

    TryHard Well-Known Member

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    Instant saving !

    Jacque, on the strength of that, I'll have 6 :D I am starting to get a persecution complex with some of the expenses I failed to consider - even though I know none of its personal :)

    Thanks for clarifying another black art ...

    Cheers
    Carl