Of course Somersofter accountants and whoever else in the know are welcome to comment as well please!
My current development No. 1 is held under a discretionary trust. At the time I was thinking bucket company. Now my understanding is that a bucket company is a short term fix.
http://somersoft.com/forums/showthread.php?t=71950
http://somersoft.com/forums/showthread.php?t=102358&highlight=bucket+company
My accountant also dislike it. So I now know I will end up paying a fair chunk of tax if I sell. (Currently all beneficiaries are maxed out at taxable income >180K.) Development No. 2 is a recently acquired Brisbane site (unconditional but yet to settle) under a company, shares held by the same discretionary trust.
I am a beginner developer. So with my new path, I am walking a bit like my 1 year old, keep falling over and still learning from mistakes. But I would like to get this done right for the No. 3 before that happens.
After chatting to my accountant he suggested the following structure for future developments, basically is the addition of a second, middle, company:
Company 1 holding development site and do development, pay 30% tax, profit goes to Company 2 as dividend, Company 1 does not retain profit
Company 2 being shareholder of company 1, is there simply holding the profit
Discretionary Trust with Corporate Trustee (Company 3) being shareholder of company 2, can receive any dividend and then distribute, if Company 2 declares a payout.
My accountant is comfortable with Company 1 paying 30% on profit because both my wife and I are in a higher tax bracket for now and the foreseeable future. So there is no short term disadvantage.
If Company 1 is under threat from external, wind down and there is no assets in Company 1. If not continue to use Company 1 to do the next development.
This I guess applies to any trading entity holding assets, risk.
Company 2 retains the profit.
Discretionary Trust with Corporate Trustee kicks in at a later stage when the beneficiaries move to a lower tax bracket or more beneficiaries emerge. For example, wife and I retire, kids >18, kids have kids, etc.
Forgot to ask him what happens if I hold a few in the development. Anyway anyone else developing using this set up? If not, what do you use?
My current development No. 1 is held under a discretionary trust. At the time I was thinking bucket company. Now my understanding is that a bucket company is a short term fix.
http://somersoft.com/forums/showthread.php?t=71950
http://somersoft.com/forums/showthread.php?t=102358&highlight=bucket+company
My accountant also dislike it. So I now know I will end up paying a fair chunk of tax if I sell. (Currently all beneficiaries are maxed out at taxable income >180K.) Development No. 2 is a recently acquired Brisbane site (unconditional but yet to settle) under a company, shares held by the same discretionary trust.
I am a beginner developer. So with my new path, I am walking a bit like my 1 year old, keep falling over and still learning from mistakes. But I would like to get this done right for the No. 3 before that happens.
After chatting to my accountant he suggested the following structure for future developments, basically is the addition of a second, middle, company:
Company 1 holding development site and do development, pay 30% tax, profit goes to Company 2 as dividend, Company 1 does not retain profit
Company 2 being shareholder of company 1, is there simply holding the profit
Discretionary Trust with Corporate Trustee (Company 3) being shareholder of company 2, can receive any dividend and then distribute, if Company 2 declares a payout.
My accountant is comfortable with Company 1 paying 30% on profit because both my wife and I are in a higher tax bracket for now and the foreseeable future. So there is no short term disadvantage.
If Company 1 is under threat from external, wind down and there is no assets in Company 1. If not continue to use Company 1 to do the next development.
This I guess applies to any trading entity holding assets, risk.
Company 2 retains the profit.
Discretionary Trust with Corporate Trustee kicks in at a later stage when the beneficiaries move to a lower tax bracket or more beneficiaries emerge. For example, wife and I retire, kids >18, kids have kids, etc.
Forgot to ask him what happens if I hold a few in the development. Anyway anyone else developing using this set up? If not, what do you use?