Fhog/trust

[Cian]

I am little confused, if you help me out that would be great.

I am building a house using the FHOG.

I have a Discretionary Tust.

Is it worth my while transfering the property into the trust in time?

One accountant has told me to do it and that the money I loose in Stamp duty i will save in tax but the other says I should only put it into a trust if its cash flow positive otherwise there is no point.

C

 

[bene313]

A trust provides greater asset protection and flexibility than holding the property in your own name.

So, it depends on whether you want or need those two things...?

Of course, if it's negatively geared you will lose the immediate tax benefits if you hold in the trust (but these can be recouped later).

 

[Cian]

The property will be slighty negatively geared.

Ofcourse I would like greater security and flexablity but but is paying stamp duty worth this?

Will i be able to recoup the stamp duty in tax benefits?

C

 

[bene313]

The cost benefit of paying the stamp duty is something you will have to decide for yourself, with help from your accountant. At least you some time to consider this and don't need to make the decision right away.

Some points to consider:

- Asset protection is generally more important if you are in business. Employees are at low risk of being sued.

- If you are accumulating property with yields of 4 or 5%, your gearing position will most likely be negative whilst you continue to accumulate. Only after you stop accumulating and allow for rents to catch up will you see some positive cashflow.

- If you are planning on not selling your properties, you will not have to deal with the capital gains tax.

- The negative gearing benefits of holding in your own name allow the accumulation of property to be faster than without those benefits.

- Trusts have administration costs (accounting, ASIC fees if you have a corp. trustee)

- It is generally best to think of the end in mind. Picture your scenario in 20 years time. Obviously this favours using trusts now.

 

[Cian]

Thanks Bene.

I think I will go down the line of transferring it into a trust but not for a while just yet.

I am planning to buy and hold for the next 10/20 years.

C