My accountant recommended this. Any developers on here using a similar set-up?

[Paul@PFI]

OC1

It might be worth it believe it or not. We did some modelling for a client where a unit would be retained in a company structure for 5 years and then sold. Recognising the 50% CGT Discount would be lost. HOWEVER. After that period they planned to retire anyway and dividends would be paid out from the company to a trust and then to the beneficiaries. With husband and wife receiving fully franked dividends the profits could be streamed out over the next 10 to 15 years effectively tax free as they would receive a full refund of the franking credits. They also had a daughter not working who could also receive distributions. This was a better result than distributing all the profits in the year of sale and paying tax and never having a chance to get refunds company taxes previously paid. So the answer isn't always that a company is a bad structure for long term holds or where trading stock changes into a fixed asset.

Yes the dividend ripping scheme is a good one for those in 60's. Add personal super contributions each year and they pay no tax and get refunded franking credits.

 

[evan1875]

OC1

It might be worth it believe it or not. We did some modelling for a client where a unit would be retained in a company structure for 5 years and then sold. Recognising the 50% CGT Discount would be lost. HOWEVER. After that period they planned to retire anyway and dividends would be paid out from the company to a trust and then to the beneficiaries. With husband and wife receiving fully franked dividends the profits could be streamed out over the next 10 to 15 years effectively tax free as they would receive a full refund of the franking credits. They also had a daughter not working who could also receive distributions. This was a better result than distributing all the profits in the year of sale and paying tax and never having a chance to get refunds company taxes previously paid. So the answer isn't always that a company is a bad structure for long term holds or where trading stock changes into a fixed asset.

That is a good one.

 

[evan1875]

I will in due course be also moving development properties that I hold in my SMSF. This is all still a work in progress, but pleased with outcome to date, there are other strategies he is currently looking at.

MTR

While recognising that our situation might be different, could you please elaborate on this a little? I have set up my SMSF with my accountant about the same time as the conversation about structuring development. But he did not mention this.

 

[MTR]

Purely tax benefits, and I don't think you pay stamp duty when moving it into SMSF

 

[evan1875]

Unit trust?

 

[Terry_w]

SMSF can undertake developments. Or a SMSF can own units in a unit trust. Or a few SMSFs can own units in a unit trust which borrows, ideally 3+ SMSF with unrelated parties.

 

[evan1875]

A trust accessing funds from a bucket company is a division 7a issue. As long as you have a complying loan agreement with repayments generally over a 7 year period and interest charged at the division 7a rate then not an issue.

Hi Mike,

So in what situation may this be appropriate? Why are so many against this?

Say if I made 200K with my development 1 under my DT. I pass all the profit to a bucket company and it pays 60K tax and 140K now sitting in my personal 'bank'. 7 year P&I loan from then on, to use the funds?

If an experienced developer does the same and makes 200K each from 4 developments a year. Basically he will be growing his personal bank at 4 times the rate.

Is this the point of having a bucket company?