Trust or Not

Discussion in 'Accounting & Tax' started by crdm, 12th Aug, 2008.

Join Australia's most dynamic and respected property investment community
  1. crdm

    crdm Member

    Joined:
    1st Jul, 2015
    Posts:
    17
    Location:
    Palm Beach QLD
    wanting a 3rd opinion, Trust or Not? Slowly building ourself a few IP, and currently they are in our own names? Should we put into a trust now or not? Or at what stage should we consider starting a trust? Any advice would be appreciated. cheers
     
    crdm, 12th Aug, 2008
    #1
  2. Simon Hampel

    Simon Hampel Founder Staff Member

    Joined:
    3rd Jun, 2015
    Posts:
    12,419
    Location:
    Sydney
    Generally you should start with the end in mind.

    Trusts are first and foremost for asset protection - and depending on the type of structure you set up, may be less tax effective in the short term (no negative gearing), but in the longer term may offer some good tax planning opportunities. You need to weigh up the costs versus the benefits.

    Are you planning on acquiring just a few IPs, or are you planning on buying a lot of them along with other investment assets? Just a few may well be better off in your own name.

    Do you work in a high-risk occupation or run your own business ? If so, asset protection is far more important and you may just have to wear the costs of a trust in the short term until it becomes self-funding.

    If you are going to go for a trust, I would do it sooner rather than later - can be expensive to move them to a trust, so best to put all new assets in there up front rather than having a mix.
     
    Simon Hampel, 12th Aug, 2008
    #2
  3. crdm

    crdm Member

    Joined:
    1st Jul, 2015
    Posts:
    17
    Location:
    Palm Beach QLD
    Thanks - and good point, may have answered my question already. The structure has been primarily focused around neg gearing, but do some trust offer the flexibility of "units" for neg gearing? Planning to acquire more properties and a little development down the road. A couple of the properties are holiday letters? whether this makes us more acceptable to litigation? And these are currently under personal names. Not in a high risk job.
     
    crdm, 12th Aug, 2008
    #3
  4. Simon Hampel

    Simon Hampel Founder Staff Member

    Joined:
    3rd Jun, 2015
    Posts:
    12,419
    Location:
    Sydney
    You are thinking of a Hybrid Discretionary Trust, which in some cases offers the ability to negatively gear - but there are downsides and potential problems with the ATO. Professional advice is required before going down that path.

    Taking due care is your first protection against litigation (ie. avoiding trouble in the first place), and insurance is your second protection. If you have sufficient insurance and keep your properties in good repair, there should be minimal chances of litigation causing you problems.

    Have a read of Nigel's article http://www.invested.com.au/77/dont-panic-real-story-asset-protection-4168/ ... and listen to his podcast http://www.invested.com.au/75/landlords-liability-34035/
     
    Simon Hampel, 12th Aug, 2008
    #4
  5. MattR

    MattR Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    214
    Location:
    Sydney
    What Sim said, and I too recommend you read the article on asset protection.

    Sometimes its just simple overkill to have a trust in place - particularly when you consider the evils of land tax.

    Since you already have IP's, now might be the time to consider a trust - but get some professional advice .

    Good luck :)
     
    MattR, 12th Aug, 2008
    #5
  6. crdm

    crdm Member

    Joined:
    1st Jul, 2015
    Posts:
    17
    Location:
    Palm Beach QLD
    thanks for the links, I will re-visit the question with our accountant again for future purchases of IP's.. cheers
     
    crdm, 12th Aug, 2008
    #6
Investment properties sent straight to your inbox