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I was just reading the investors club news section when I came across an article by Kevin Young suggesting people shouldn't buy property using a trust or company. The reason being that when you want to withdraw the extra equity after capital growth it will be taxable-when it is distributed to the individual.
What do people think? How would Steve Navra's cashbond work if you had bought the property in a company name?
Here is an excerpt from http://www.investclub.com.au/new/frames.html:
"Don't trust a trust" - Kevin Young -25/01/02
Probably one of the most common questions I am asked around Australasia is, “Why do you not recommend buying property in a Trust or a Company as my Accountant/Solicitor advises?”
I recommend never buying a rising asset in a Company or a Trust. When you try to tap into this increased appreciation, you do not want to pay tax. If you purchase in your personal names it is simply borrowing and not regarded as income.
However, had you bought this as a rising asset in a Company or Trust, then that entity borrows the money first and then distributes to you second. This distribution means you have to declare it as part of your taxable income!
Therefore, never put rising assets in a Company or a Trust. You will just make your Solicitor and Accountant rich maintaining the records and filing Government returns.
But what about their claim that Trusts or Companies protect you from creditors? You have to weigh this vague possibility up against the certainty of losing between 30% to 50% of your wealth to tax! I would rather take the slight risk of a creditor attack and mitigate this by, in a worse case scenario, taking up suitable insurance. This may be1% or 2% of your wealth verses losing the certainty of 30% to 50% of your wealth to tax.
Another real concern of mine is - political meddling. Once your assets are in a Company or Trust they are at the mercy of Government meddling. Who knows what penalties or taxes will be imposed on Companies and Trusts by future Governments!!
I was just reading the investors club news section when I came across an article by Kevin Young suggesting people shouldn't buy property using a trust or company. The reason being that when you want to withdraw the extra equity after capital growth it will be taxable-when it is distributed to the individual.
What do people think? How would Steve Navra's cashbond work if you had bought the property in a company name?
Here is an excerpt from http://www.investclub.com.au/new/frames.html:
"Don't trust a trust" - Kevin Young -25/01/02
Probably one of the most common questions I am asked around Australasia is, “Why do you not recommend buying property in a Trust or a Company as my Accountant/Solicitor advises?”
I recommend never buying a rising asset in a Company or a Trust. When you try to tap into this increased appreciation, you do not want to pay tax. If you purchase in your personal names it is simply borrowing and not regarded as income.
However, had you bought this as a rising asset in a Company or Trust, then that entity borrows the money first and then distributes to you second. This distribution means you have to declare it as part of your taxable income!
Therefore, never put rising assets in a Company or a Trust. You will just make your Solicitor and Accountant rich maintaining the records and filing Government returns.
But what about their claim that Trusts or Companies protect you from creditors? You have to weigh this vague possibility up against the certainty of losing between 30% to 50% of your wealth to tax! I would rather take the slight risk of a creditor attack and mitigate this by, in a worse case scenario, taking up suitable insurance. This may be1% or 2% of your wealth verses losing the certainty of 30% to 50% of your wealth to tax.
Another real concern of mine is - political meddling. Once your assets are in a Company or Trust they are at the mercy of Government meddling. Who knows what penalties or taxes will be imposed on Companies and Trusts by future Governments!!
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