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Purchasing Units in a Unit Trust

Discussion in 'Accounting, Tax & Legal' started by DaveA, 21st Sep, 2007.

  1. DaveA

    DaveA Well-Known Member

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    Just thinking about this one. Probably more for the accountants around here.

    If you purchase units in a trust do you have to pay stamp duty for the property again? Would this be any different if you bought units in a company??

    i remember reading yes, but i cant think why.... If the answer is yes, what happens if you buy 5% of the units, is it 5% of the stamp duty????

    I know there would be CGT issues, and id imagine youd calculate the value of each unit to be value of value of assets - loans in trust = net unit holders equity then divide this by units to get a cost per unit.
     
  2. Rob G.

    Rob G. Well-Known Member

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    No stamp duty on transfer or listed or unlisted securities in Victoria.

    This does not apply to land-rich entities, look at unencumbered land value for a notional conveyance.

    Distributions & returns in-specie are another problem - depends on asset type.

    **Don't know about NSW**

    For CGT valuation, are you referring to securities for which there is no market ? Net asset value is often used for redeeming of capital-only units, or for apportioning cost base on stapled securities etc. Whether this is a suitable method or not usually requires a ruling !!!

    Cheers,

    Rob
     
  3. DaveA

    DaveA Well-Known Member

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    Any idea on the threshold? Would hold one or 2 properties per unit trust escape this though?

    Distributions & returns in-specie are another problem - depends on asset type.
    this was the state i was mainly looking for,i might have a look on the state revenue site

    How do unit trusts have capital only units, i thought unit trusts units are basically the exact same style as a share in a company, maybe ive missed something...
     
  4. Rob G.

    Rob G. Well-Known Member

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    State taxes are not my area. Land tax can get quite nasty for unit trusts.

    You could try this NSW Govt link:

    Factsheets

    You can have different classes of beneficiary in unit trusts - just watch the streaming. Also a unit trust might not be regarded as a fixed trust for things like carry-forward losses.

    I definitely do not know anything about a HDT. Every time I study it, the 'accepted' view of the law changes and destroys my confidence !!!

    Cheers,

    Rob
     
  5. DaveA

    DaveA Well-Known Member

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    Finally ive had some time to look at this...

    Thhis Page is the only thing that relates, however i dont understand what its trying to get at. Theres another page which defines related parties which is what the transaction would be.

    I think im going to send them off a email to clarify.
     
  6. DaveA

    DaveA Well-Known Member

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    So in saying that, it seems transfer of units is at 0.6% when you transfer property (up around 4 or 5%). When you consider the options you have, surely it there is enough upside for people who invest in IPs (via DTs or HDTs) in NSW to buy them in a unit trust (for this future saving, if you plan to push it over to a SMSF, or even sell it to a related entity to release some of the equity and turn the whole amount into deductible debt), despite to additional accounting fees that may be involved (most of it would be incurred anyway like tax return, depn schedule, advice etc, the only additional thing maybe asic fees for a corp trustee). It would require a new trust for each property to be most effective (which is set up fee), but from a risk management fee there is no more risk using one corp trustee for 5 unit trusts holding 1 property each, than the same corp trustee for 5 properties in one unit trust

    Id love to here if people think im nuts and making it all two complicated or if people think there is merit behind the idea. Hopefully Nick gets a chance to read this.

    But when you look at Stockland, Multiplex etc this is all how they hold their properties. None of them sell the property, just the units in the trust to someone else.

    **the other thing is while HDT’s are still uncertain, if you buy in a HDT and within the HDT a unit trust, if the decision goes the wrong way on a HDT and interest isn’t allowed. You could actually transfer the unit trusts units to your name and still get the negative gearing benefits (abet no asset protection). Basically being an each way bet with very little as an insurance premium (the 0.6%)**

    One final thing - this not tested and there for only information, no one should rely on this with out speaking their professionals. Additioanlly this is only suitable in NSW, i have not looked into other states as yet
     
    Last edited by a moderator: 28th Sep, 2007
  7. Rob G.

    Rob G. Well-Known Member

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    Dave,

    Unsure about NSW ...

    I believe that the units should be listed securities for you to be able to transfer to your or a related party SMSF (SISA s.66 in-house assets exemption).

    Need to check this,

    Cheers,

    Rob
     
  8. DaveA

    DaveA Well-Known Member

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    Thanks Rob, i didnt htink the in house rule would apply as you would be selling an IP units to your SMSF. I know before 30 June this was huge as people were selling out of IPs which were not structured properly (ie not in a unit trust) to get the cash into their SMSF. People were saying if it was held in a Unit Trust the property could just be straight transfered with no issues.
     
  9. Rob G.

    Rob G. Well-Known Member

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    Dave,

    Property in specie had to be business real property or listed securities, otherwise they had to sell and contribute the cash as far as I am aware.

    Apologies in advance to the Commonwealth for reproducing only a part of the Act, without full context, but this is the bit that I think affects you ...

    ****************************
    66 Acquisitions of certain assets from members of regulated
    superannuation funds prohibited

    Prohibition

    (1) Subject to subsection (2), a trustee or an investment manager of a
    regulated superannuation fund must not intentionally acquire an
    asset from a related party of the fund.

    Exception—acquisitions of business real property and listed
    securities

    (2) Subsection (1) does not prohibit a trustee or investment manager
    acquiring an asset from a related party of the fund if:

    (a) the asset is a listed security acquired at market value; or

    (b) if the fund is a superannuation fund with fewer than 5
    members—the asset is business real property of the related
    party acquired at market value; or .......

    ***********************************

    I don't see how a unit in a trust that holds business real property can claim this exemption as a beneficiary does not have an interest in any particular asset.

    This then requires the units themselves to be listed securities to overcome the problem.

    This is of course my interpretation ...

    Cheers,

    Rob
     
  10. DaveA

    DaveA Well-Known Member

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    It seems pretty clear...

    Maybe i was getting confused with the SMSF can originally buy part of the unit trust as long as their is no debt attached to the property.

    Once again someone can say what they want but until it gets backed up by legislation its as good as nothing.
     
  11. Rob G.

    Rob G. Well-Known Member

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    I believe the SMSF can be tenants in common with the members (not too sure about joint tenants) to the underlying property provided there is no encumbrance on the SMSF share.

    You still need to be VERY careful with this one, even with business real property.

    This needs to be checked ...

    Cheers,

    Rob