How many Properties in a Trust in Q'land

Discussion in 'Accounting and Tax' started by see_change, 15th Jun, 2015.

  1. see_change

    see_change Apprentice Timing Lord

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    Previous cycle , we were able to put several proprieties in each trust in Q'land

    Currently , threshold is 350 K land tax per trust .

    We're buying IP's , land value just over 100 K . Assuming prices double in next few years , then two IP's in a trust will take you over the threshold.

    So pay land tax , vs increase set up costs and ? increase accounting for extra trusts

    Part of the issue is we're not sure at this time how long we will hold the properties . Plan is to sell once we've seen that growth , but we've certainly changed our plans in the past when we've seen opportunities come up

    Any thoughts ?

    Anyone looking at the same issue ?

    Cliff
     
  2. DavidMc

    DavidMc Member

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    Yes I've been stung with this inefficient and pointless tax even from just two median priced properties. $1.8k worth per year!

    I will be purchasing in my own name in QLD from now on. Given your profession you may not have that luxury.

    If I were using DTs I'd have 1 or 2 in 1 maximum (whatever takes you up to the threshold). Sure, more accounting costs, but you can get a lot of accounting for $1.8k.

    An extra trust would only add $500-800 to your end of year bill surely?
     
  3. see_change

    see_change Apprentice Timing Lord

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    That's what I'm thinking , but when you looking at buying a few ......

    On an annual basis with one property / trust would probably be less . We have companies available to use as trustees .

    I like the ease with which we can distribute from our profitable trust to cover shortfalls in others , and also can distribute profits in different directions .

    Cliff
     
  4. DavidMc

    DavidMc Member

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    You might find an accountant who is more willing to negotiate a better rate than the SRO is with their land tax :)

    I don't understand the formula accountants use to charge but I would image the greater work for them are the additional properties rather than additional trusts.
     
  5. DavidMc

    DavidMc Member

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    Also, the DTs can be used for new buys in other states too (say 1x QLD, 1x WA).
     
  6. see_change

    see_change Apprentice Timing Lord

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    Yep , we've done that .

    SA is the same as Q'land .... Maybe we should look at buying some there rather than more in brissie , but we know brissie and still finding good deals .

    Cliff
     
  7. Terry_w

    Terry_w Member

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    This is only the case if the trusts are not identical and beneficiaries are different.

    There is a trap for young players with s20(2)(b) and s24.

    Because there is no stamp duty on a trust set up in QLD why not just set up one trust per property.
     
  8. see_change

    see_change Apprentice Timing Lord

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    That's what I was going to do . Just slight more work accounting wise .

    Cliff
     
  9. D.T.

    D.T. Property Lookerafterer

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    SA threshold is fairly generous - can perhaps reuse the trusts when you buy down here too?
     
  10. see_change

    see_change Apprentice Timing Lord

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    We'd do that , though still finding deals we like in Brisbane . Depends on what runs out first , the deals or the money ;)

    Cliff
     
  11. RPI

    RPI Member

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    I would normally go 1 per trust (and personally do). Corp trustee is easiest way to ensure separate threshold for each.

    BUT
    - if need to access NG and don't have any +ve cashflow trust income to distribute then will be an issue
    -Initial setup plus annual costs need to be evaluated.

    Big issue is getting it wrong and needing to unwind years later. What if you get to a stage where your land tax hits $10k plus more than it would have been because you have had significant growth in your multiple properties in 1 trust. You effectively have to sell it to yourself (or another trust) to retain and that means CGT on the way out and Stamps on the way it.

    Problem is how to predict future, will thresholds increase etc or will land tax go as a trade off for >GST rate.

    If you can find an accountant that charges per property rather than per trust that helps, just need to allow the $270 ish (and climbing) for stamp duty
     
  12. see_change

    see_change Apprentice Timing Lord

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    Thanks for the feedback everyone .

    btw RPI ? typo re GST in second paragraph ?

    I'd been assuming 1 / trust , but just wanted to run it past the " Brains Trust " .

    In the previous cycle we had up to 5 IP's / trust in Q'land with no land tax , but obviously the tax free threshold hasn't moved up significantly .

    Cliff
     
  13. Paul@PFI

    Paul@PFI Tax, SMSF & Planning

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    There are many reasons why a trust investment in QLD requires comprehensive advice. Land tax may be the least of your concerns if you dont understand some of the complexities of stamp duty in QLD.

    The question :How many properties is a good example. Lets assume its a unit trust. You buy two IPs at $100K a piece, A few years later one is a dog and valued at $99k and the other $200k...You decide to sell the dog. A$1k capital loss ??WRONG. The capital gain is a $99K capital gain for the unitholder. And of course you then think on unitholder redeeming all their units a smart option. This results in the $200K property being subject to stamp duty on $100K.

    Trusts in QLD can be subject to the indirect stamp duty problem that other states dont have.
     
  14. see_change

    see_change Apprentice Timing Lord

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    Straightforward discretionary trust .

    Looked at all the other structures and wasn't convinced of any benefits in our situation .

    For me it was an example of the KISS principle .

    Cliff
     
  15. Terry_w

    Terry_w Member

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    Not such thing!
     
  16. see_change

    see_change Apprentice Timing Lord

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    Some are more straightforward than others . It's not a unit or hybrid, or a special one that can only be driven by the accountant / lawyer / marketing company it's bought off ....:rolleyes:

    Cliff