Property Investment while working overseas

My wife and I are currently working overseas and are therefore not earning taxabale income in Aus. We are looking at investing in property and have a feeling that using a trust is the best method for this. As such, I am in the process of setting up a discretionary trust and a company as the trustee as well as placing a small deposit on a property. I'm now starting to see how much work and information needs to go into these things. I'm a systems accountant so I'm not so clued up on tax and legal issues but I should be able to learn quickly. There is a decent chance that my wife and I will not be earning much Aussie income over the next few years and, when we do, our property may have a positive cash flow.

My question is, have I moved in the right direction for tax purposes? Should I be looking at a hybrid trust?

 

Hi R&B

The old Hybrid Trust question - this always seems to create a bot of a stir. I won't get into that yet I'll just make some general comments.

In NSW if a discretionary trust owns property then it cannot get the land (free) tax threshold which equates to about an extra $6000 in land tax if tyhe land value is over $352,000 (2007 year). Victoria is similar but I can't remember about the other states.

...so be careful in what type of trust you use and for what purpose.

Another thing, if you use a trust any rental property losses are going to be quarrantined (to be carried forward). This would be the same in your own names, that is the losses are quarrantined if they exceed other Aus income that you have.

So before I go any further why do you want to use a trust?

 

As MattR says - "So before I go any further why do you want to use a trust?"

I can profer some reasons for R&B to consider

- Asset protection
- Flexible tax distributions for positive geared investments
- Bad news for negative geared investments as losses must be quarantined OR even lost if a FTE is not made, loss of franking credits, if any.
-Consider a spread of properties for Land Tax considerations, positive geared investment in trust and negative geared investments for each of Mr & Mrs. each a differnt entity.

 

Are you residents for tax purposes ?

Also, are you Australian nationals for being directors of the Trustee company and beneficial owners of Australian property ?

There is quite a lot to consider.

Cheers,

Rob

 

My wife and I are residents for tax purposes but we are currently not earning income that is taxed in Australia. I'm actually a New Zealand citizen that has lived in Aus for 25+ years and my wife is Aussie. We are both listed as directors of the trustee company and also the beneficiaries of the trust. Never considered that my citizenship would be an issue as I rarely think of myself as a Kiwi.

To answer previous questions, the aim is both asset protection and distribution of income. I expect the investment to be positively geared in the near future (2-3 years). I would also like to add more investments but that can always be structured differently as I become more informed and experienced in regards to property investment.

In all honesty, I've really rushed this whole process and I am now finding out how much I don't know