Ebbie said:No worries Rolf.Feeling sheepish?
Totally off topic, but how do you rename a link like that?
I'm impressed!!
Cheers
Hybrid Trust Vs "Property Investors Trust"
- Thread starter Ebbie
- Start date
Totally off topic, but how do you rename a link like that?
I'm impressed!!
Cheers
Imformative newsletter just emailed from Knowledge centre.
No point attaching link as you have to be registered to view, text of page follows:
What is the Property Investor Trust™ Deed?
It has been the topic of numerous website forums. Accountants around the country are clamouring to know what it is. Is this a new tax vehicle set to change the course of investing in Australia or is it a marketing gimmick by some clever accountants? Tony Melvin and Ed Chan speak openly about the Property Investor Trust™ Deed.
Firstly let's dispel the myths, the Property Investor Trust™ Deed is not a discretionary or hybrid trust renamed. It is a deed that has been written with specific clauses relating to property investing. And just how important is that? Well here's an example: In a recent case the High Court has held that unit holders (depending on the wording of the deed) are not liable to land tax in Victoria. This came down to 3 words in the deed!
And deeds are written differently by different solicitors. The point we are making is that not all trusts are the same. Even the same type of trust such as a Unit, Hybrid or Discretionary trust is written differently by different solicitors. These trusts have standard deeds that were not written specifically for property and what accountants and solicitors have done is to try and adapt it to property.
Whenever one tries to make something fit into something that it was not specifically built for, it invariably has some side effects. For example: Unit trusts, when used for property investing, create a capital gains tax issue where the cost base (value of the property at purchase) is reduced through depreciation, the net effect is you will pay more capital gains tax when you sell. The Hybrid trust is great in some states but in NSW they lose the land tax threshold. Discretionary trusts are rarely recommended for properties because they not only lose the land tax threshold in NSW but they quarantine the losses inside the trust which means negative gearing benefits cannot be claimed by the individual. Hence, in each case there is a negative when these trusts are used for property. However, our Property Investors Trust™ Deed doesn't have these negatives. It has been tailor made for property and has none of the side effects that are associated with the other deeds. In fact, we do not use the Property Investor Trust™ Deed for other things such as businesses, because it was not built for it. We would use a discretionary, hybrid or unit trust for such a purpose as that is what they were designed for - businesses, shares, etc ... but not property.
In short, being specialist in this game we came up with the ideal structure that would provide the most flexibility, taking into account land tax for all states, capital gains tax and income tax. This is combined with asset protection and estate planning. The result is one of the most flexible trust structures for Australian property investors.
The second myth is that the Property Investor Trust™ Deed is a marketing gimmick - this is most definitely not the case. Yes, scarcity alone will create demand for Chan & Naylor so it appears to be such a technique but we'll let you in on something. The deed itself is useless. It takes someone who knows how to use it and maximise its benefits at tax time to be of worth. Not many people realise this but actually establishing a trust is only 20% of the game. The rest is how it is used and the Property Investor Trust™ Deed is no different. Also, we charge no more for the Property Investor Trust™ Deed than we do the other types of trusts, further proof that it is not just a marketing gimmick.
Finally, why don't we simply tell people how it works? Well ask Colonel Sanders about his 11 herbs and species - intellectual property like this takes years of experience to develop and come to fruition. It is our intention to make it broadly available and to provide the service to back up that demand. In short, it's our IP and we are protecting it so that those who avail themselves of this type of structure know that they will receive the maximum benefit possible from it.
And in closing we'd like to point out that it is not a tax minimisation vehicle, it is not a product that needs to be registered with the ATO - it is a trust deed, like a discretionary or unit trust - it outlines the agreement between the trustee and beneficiaries.
For quick reference and summary here are the benefits of the Property Investor Trust™ Deed:
Asset Protection.
Estate Planning (allows you to pass on property to your children with no CGT and stamp duty and protects them from their divorce).
Allows the negative gearing to be claimed by the individual.
Allows the CGT to be distributed to the lower taxpayer.
Provides a land tax threshold.
Allows you to minimize your tax position as the property changes from negative to positive gearing or vice versa and or if your circumstance changes (i.e. wife goes back to work or decides to stop working, without triggering CGT and stamp duty).
It is the only Trust specifically setup for property where all other Trusts were not setup specifically for property and each one has some shortcomings when adapted to property.
Allows anonymity with your assets held by a corporation as trustee.
So is it clever structuring and smart marketing? Well it's a bit of both and if you are a property investor you'll love it!
Happy investing.
Regards Tony Melvin & Ed Chan
No point attaching link as you have to be registered to view, text of page follows:
What is the Property Investor Trust™ Deed?
It has been the topic of numerous website forums. Accountants around the country are clamouring to know what it is. Is this a new tax vehicle set to change the course of investing in Australia or is it a marketing gimmick by some clever accountants? Tony Melvin and Ed Chan speak openly about the Property Investor Trust™ Deed.
Firstly let's dispel the myths, the Property Investor Trust™ Deed is not a discretionary or hybrid trust renamed. It is a deed that has been written with specific clauses relating to property investing. And just how important is that? Well here's an example: In a recent case the High Court has held that unit holders (depending on the wording of the deed) are not liable to land tax in Victoria. This came down to 3 words in the deed!
And deeds are written differently by different solicitors. The point we are making is that not all trusts are the same. Even the same type of trust such as a Unit, Hybrid or Discretionary trust is written differently by different solicitors. These trusts have standard deeds that were not written specifically for property and what accountants and solicitors have done is to try and adapt it to property.
Whenever one tries to make something fit into something that it was not specifically built for, it invariably has some side effects. For example: Unit trusts, when used for property investing, create a capital gains tax issue where the cost base (value of the property at purchase) is reduced through depreciation, the net effect is you will pay more capital gains tax when you sell. The Hybrid trust is great in some states but in NSW they lose the land tax threshold. Discretionary trusts are rarely recommended for properties because they not only lose the land tax threshold in NSW but they quarantine the losses inside the trust which means negative gearing benefits cannot be claimed by the individual. Hence, in each case there is a negative when these trusts are used for property. However, our Property Investors Trust™ Deed doesn't have these negatives. It has been tailor made for property and has none of the side effects that are associated with the other deeds. In fact, we do not use the Property Investor Trust™ Deed for other things such as businesses, because it was not built for it. We would use a discretionary, hybrid or unit trust for such a purpose as that is what they were designed for - businesses, shares, etc ... but not property.
In short, being specialist in this game we came up with the ideal structure that would provide the most flexibility, taking into account land tax for all states, capital gains tax and income tax. This is combined with asset protection and estate planning. The result is one of the most flexible trust structures for Australian property investors.
The second myth is that the Property Investor Trust™ Deed is a marketing gimmick - this is most definitely not the case. Yes, scarcity alone will create demand for Chan & Naylor so it appears to be such a technique but we'll let you in on something. The deed itself is useless. It takes someone who knows how to use it and maximise its benefits at tax time to be of worth. Not many people realise this but actually establishing a trust is only 20% of the game. The rest is how it is used and the Property Investor Trust™ Deed is no different. Also, we charge no more for the Property Investor Trust™ Deed than we do the other types of trusts, further proof that it is not just a marketing gimmick.
Finally, why don't we simply tell people how it works? Well ask Colonel Sanders about his 11 herbs and species - intellectual property like this takes years of experience to develop and come to fruition. It is our intention to make it broadly available and to provide the service to back up that demand. In short, it's our IP and we are protecting it so that those who avail themselves of this type of structure know that they will receive the maximum benefit possible from it.
And in closing we'd like to point out that it is not a tax minimisation vehicle, it is not a product that needs to be registered with the ATO - it is a trust deed, like a discretionary or unit trust - it outlines the agreement between the trustee and beneficiaries.
For quick reference and summary here are the benefits of the Property Investor Trust™ Deed:
Asset Protection.
Estate Planning (allows you to pass on property to your children with no CGT and stamp duty and protects them from their divorce).
Allows the negative gearing to be claimed by the individual.
Allows the CGT to be distributed to the lower taxpayer.
Provides a land tax threshold.
Allows you to minimize your tax position as the property changes from negative to positive gearing or vice versa and or if your circumstance changes (i.e. wife goes back to work or decides to stop working, without triggering CGT and stamp duty).
It is the only Trust specifically setup for property where all other Trusts were not setup specifically for property and each one has some shortcomings when adapted to property.
Allows anonymity with your assets held by a corporation as trustee.
So is it clever structuring and smart marketing? Well it's a bit of both and if you are a property investor you'll love it!
Happy investing.
Regards Tony Melvin & Ed Chan
Hi All,
Back from the dead for a short amount of time....
To put on my PI hat...
Sounds like an interesting concept, looks like Ive got some more reading to do!
To put on an ATO hat...
What is the purpose of the PIT? Do we pass it off as asset protection? But a mulitple trust structure for asset protection?
Purpose might be a sticking point when the ATO comes to rule on it?
XBenX
Back from the dead for a short amount of time....
To put on my PI hat...
Sounds like an interesting concept, looks like Ive got some more reading to do!
To put on an ATO hat...
What is the purpose of the PIT? Do we pass it off as asset protection? But a mulitple trust structure for asset protection?
Purpose might be a sticking point when the ATO comes to rule on it?
XBenX
mmm
very interesting
i have heard a lot about this Prop Inv trust but cannot really pass any comment as i have not seen the trust deed.
It appears to look and smell like a HDT but with the added benefit of the land tax threshold.
Unfortunately, it has not yet been tested and the OSR will take your land tax return as being correct unless they conduct an audit. At that point they may wish to review your trust deed. This will be the test.
The OSR look at tracing the beneficial ownership of the property when assessing land tax. A discretionary trust, has no real beneficial owner which is why it is assessed without a threshold.
If a unit trust had 2 individuals as unit holders then it would receive a threshold.
Its all fun !
nickM
very interesting
i have heard a lot about this Prop Inv trust but cannot really pass any comment as i have not seen the trust deed.
It appears to look and smell like a HDT but with the added benefit of the land tax threshold.
Unfortunately, it has not yet been tested and the OSR will take your land tax return as being correct unless they conduct an audit. At that point they may wish to review your trust deed. This will be the test.
The OSR look at tracing the beneficial ownership of the property when assessing land tax. A discretionary trust, has no real beneficial owner which is why it is assessed without a threshold.
If a unit trust had 2 individuals as unit holders then it would receive a threshold.
Its all fun !
nickM
We actually have one of these trusts set up through Chan and Naylor but don't know much about the technical ins and outs of it nor have had a tax year cycle to put it through the test. But if there is anything I can check on the trust deed let me know!
LibraCharlie
LibraCharlie
Hi Libra
I was once told that trust deeds are like air bags and the "safety cell" of a car.
If you are in a serious crash youd want to make sure the stuff had been pre tested :O)
ta
rolf
I was once told that trust deeds are like air bags and the "safety cell" of a car.
If you are in a serious crash youd want to make sure the stuff had been pre tested :O)
ta
rolf
We are told it has been pretested many times - just not by us personally!
libracharlie,
Are you saying you have a Property Investors Trust (PIT), or are you referring to the Hybrid Dscretionary Trust (HDT), that Jen mentioned earlier?
If it is the PIT, then I'm sure there's a lot of questions people on the forum would want to ask you. As yet, I haven't heard of anyone who has actually purchased this product, or admitted to it...
GSJ
Are you saying you have a Property Investors Trust (PIT), or are you referring to the Hybrid Dscretionary Trust (HDT), that Jen mentioned earlier?
If it is the PIT, then I'm sure there's a lot of questions people on the forum would want to ask you. As yet, I haven't heard of anyone who has actually purchased this product, or admitted to it...
GSJ
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Mmm. Admitted to it? Not sure what you are implying there... Happy to answer any questions, though, if we can. It is a PIT (unfortunate acronym!) that we have.
LC
LC
Hi,
Advantages are often in the eye of the beholder, but according to Chan & Naylor the main benefit of the PIT over an ordinary HDT are potential land tax concessions. We 'interviewed' a number of acountant firms and an HDT would have suited our plans, but we found Chan & Naylor a very professional organisation, so went with their PIT. Our original accountant was excellent but refused to consider an HDT and dismissed it as a gimmick, so we switched. If you take up their $250 'consultation' they do go on a bit about the psychology of investing so if you are new to the game it is worth listening to, but if not, try to steer them onto something more personal a bit earlier.
LC
Advantages are often in the eye of the beholder, but according to Chan & Naylor the main benefit of the PIT over an ordinary HDT are potential land tax concessions. We 'interviewed' a number of acountant firms and an HDT would have suited our plans, but we found Chan & Naylor a very professional organisation, so went with their PIT. Our original accountant was excellent but refused to consider an HDT and dismissed it as a gimmick, so we switched. If you take up their $250 'consultation' they do go on a bit about the psychology of investing so if you are new to the game it is worth listening to, but if not, try to steer them onto something more personal a bit earlier.
LC
Hi LibraCharlie,libracharlie said:
I was wondering for negative gearing are the units issued by a Property Investors Trust called 'Special Income Units' with right to income only?
I'm also interested to know if income can be distributed to discretionary beneficiaries while there are Income Units issued, or is there a clause along the lines of 'Income Unit holders are entitled to 100% of the income'.
Basically is it like a Hybrid Trust where it can only act as a discretionary trust once all the Income Units have been redeemed?
