Structure working backwards

Saw somewhere on here that when determining how to structure your investments you should look at how you want them to finish as it is expensive and difficult to restructure later.

My goal is in about ten years is to have:

My PPOR
2 IP (Probably worth approx $800k-$900k) with loans at 80%
Managed funds (worth approx $1mill)
Shares (worth approx $100k)

For these assets what is the best way to structure them? To reach these goals I expect I will need to do a significant amount of gearing and would certainly like to protect my PPOR. Also, I expect for most of this time I will be working as a contractor (and hence may need to set up a ltd company for this?).

Thanks,

JR

 

Hi JR

Firstly, you need to speak with your advisors, accountant, FP & solicitor.

a few questions ;
- married/single
- children (ages)
- your age (in decades)
- contracting - what you do?
- income, how much do you ean and expect to earn now, 1-5 years, 5-10



-

 

MattR,

Thanks for your response. Am going to the Navra seminar next week, and am looking for a financial advisor. Just want to be as informed as possible to be able to evaluate if the advise they give is worthwhile!

Answers to your questions:

Engaged - getting married early next year.
No children
Both about 30.
I work in IT (for a consulting company currently).
Expect to be able to "invest" about $4k-$5k per month for the next 5-10 years.

Thanks,

JR

 

where are you now along the path JR

 

We own our own unit (currently our PPOR) outright (worth approx $475k). Will be looking to buy a house in a few years time. Current place could become one of our IP's in the future. Starting to building up some managed funds again (got out of everything last year before the big drop to pay down the mortgage - now looking to drawdown to build the managed funds back up).

JR

 

Hi jrc...sounds like nice timing with the managed funds.

First thought that hits me is that if your current PPOR becomes a IP then your borrowings will be non-deductible for the new PPOR, assuming that you borrow of course. However if you used the equit in the current PPOR for investment purposes that that would be deductible.

As for structures...hmmm. Since gearing going to be involved you might consider a UT with a DT underneath. Only problem there is damn land tax!!!! However it does give you flexibilty down the track to streamline things tax effectively and offers asset protection.

 

Matt,

I've seen you mention the UT/DT combination a couple of times in forums ... how would this work? What advantage does this give you over a HDT or a single UT or DT?

Regards,

JR

 

One aspect of the UT/DT scenario is its relatively simple deeds compared to the HDT. In light of the ATO alert on using an HDT in a particular way, why not take that out of the equation with a UT/DT.

The ability to transfer units in a DT free of stamp duty at the general rate is a great advantage, being mindful of course for little nasties like the land rich provisions (see link)

Acquisitions of shares or units in land rich entities - NSW Office of State Revenue

Now the transfer may incur CGT but if done in a piece meal fashion and timed well against other tax planning items eg. super, this can be managed quite effectively.