NSW Land Unit Trust - Any Good?

I have read about NSW Land Unit Trusts but I am yet to be convinced whether they have any real benefits.

Have any forumites had any good experiences using them? Or are they complex expensive things with little benefits?

Thanks in advance for your replies.

SYD
 
Benefits include:
- Ability to acquire the land tax free threshold in NSW if individuals own the units
- Ability for the individual to borrow and personally claim the interest on the loan
- Ability to transfer the units without stamp duty in NSW from next July (if Govt abolishes stamp duty as planned)
- Ability to use the refinancing principle whereby the trustee can borrow to redeem the units. In a around about way this will enable borrowings for private expenses to be deductible
- Ability to separate legal ownership from beneficial
- Greater privacy by only having the trustee on records that are publicly searchable.
- Slightly greater asset protection than if holding in your own name
- Possibility of transferring the units to your SMSF down the track.

Drawbacks
- Slightly more complex with getting finance
- greater legal complexity
- greater tax complexity
- additional regulation over owning in your own name - trustee duties, Director duties, Corporations Act, Trustee Act etc
- cost more to run with tax returns, ASIC annual fees of $230 etc
 
Thanks for your reply Terryw. I know you are a fan of trusts so I appreciate your reply.

Point 1 - re land tax free threshold. I also read up that the unit holders need to be individuals otherwise land tax is payable from the first dollar. Having a family discretionary trust owning units in a NSW land trust doesn't work.
Point 2 - would still apply if property was owned by individuals.
Point 3 - the NSW government is crying poor at the moment but I believe the stamp duty amendments are likely. This is a potential advantage.
Point 4 - This could be a future advantage.
Point 5 - Not sure how this would work if individuals would need to own units in the trust in order to obtain the benefit of the land tax free threshold.
Point 6 - Agreed
Point 7 - Only slight greater asset protection but weak compared to if owned in different trust structures.
Point 8 - Potential future benefit.

Overall, my assessment is not a great deal of benefit compared with owning the first investment property asset directly. For second and future NSW investment properties other trusts would offer superior benefits.

I'm still interested to hear any war stories of people actually using NSW Land Unit Trusts.

SYD
 
Drawbacks
- Slightly more complex with getting finance
- greater legal complexity
- greater tax complexity
Is this compared to individual or DT?

I asked my broker how hard it is to get loan under trusts structure. He said that DT is not a problem but not sure about the unit trust. I thought unit trusts are less complicated than the DT.

For second and future NSW investment properties other trusts would offer superior benefits.
If the land tax threshold is already reached then isn't it definitely better to buy under a unit trust than buying under individual names?
Later on, if you are really desperate for asset protection then can't you sell the units to a DT?
 
Is this compared to individual or DT?

If the land tax threshold is already reached then isn't it definitely better to buy under a unit trust than buying under individual names?
QUOTE]

I'm not sure what you mean by this. Do you mean a standard unit trust held by a DT? Or do you mean a standard unit trust owned by individuals?

If the land tax free threshold has been reached I do not see the point of holding in a NSW Land Unit Trust.

SYD
 
Is this compared to individual or DT?

I asked my broker how hard it is to get loan under trusts structure. He said that DT is not a problem but not sure about the unit trust. I thought unit trusts are less complicated than the DT.


If the land tax threshold is already reached then isn't it definitely better to buy under a unit trust than buying under individual names?
Later on, if you are really desperate for asset protection then can't you sell the units to a DT?

DTs arent a like for some lenders because the units can be onsold .........thus diluting the security

Still doable in general though unless you are a hard case :)

ta

rolf
 
Is this compared to individual or DT?

...

If the land tax threshold is already reached then isn't it definitely better to buy under a unit trust than buying under individual names?
Later on, if you are really desperate for asset protection then can't you sell the units to a DT?

I was comparing to buying in personal names. A UT is similar to a DT in regards to legal and tax complexity.

I agree about the land tax threshold issue and a UT being better than personal names. If you buy in your own name than you cannot transfer to a SMSF later (unless business real property) and there would be stamp duty on the transfer to another at full market rates. At the moment it is only 0.6% stamp duty in NSW and this will be, probably, abolished next July.

However, there is little asset protection for a transfer of units to a DT because of the clawback provisions in the bankruptcy act. So if your threshold has been used up you may as well use a DT to own the units.
 
Point 5 - Not sure how this would work if individuals would need to own units in the trust in order to obtain the benefit of the land tax free threshold.

....

Overall, my assessment is not a great deal of benefit compared with owning the first investment property asset directly. For second and future NSW investment properties other trusts would offer superior benefits.

SYD

hi Syd

I think there can be advantages to not owning property legally in your own name.

Take for instance someone doing a land titles search. They wouldn't find the property if searching under an individual name. They could however find the company trustee, if you are associated with it, by doing an ASIC search. But it is amazing how someone will stop then and there if they have to spend $20 to do a search.

So this has asset protection benefits just here. If it went as far as an individual being bankrupted then the trustee in bankruptcy wouldn't directly get their hands on the property, but the units (maybe). This can be advantageous where the terms of the trust deed gives restrictions in time on the redemption of units or the sale of property etc.

Then there is the privacy aspects.

Estate planning aspects as the property will not form part of your estate - the units could if held individually.

Also the ease of passing of control. You can transfer units without needing to transfer the title to the property.
 
N.S.W.*Land*Tax*Unit*Trust

I came across this N.S.W.*Land*Tax*Unit*Trust (attached).

Terry, you said "- Ability to acquire the land tax free threshold in NSW if individuals own the units"
Is that assuming that individual hasn't reached their threshold??
 

Attachments

  • I1_Report_Land_Tax_Unit_Trust_Report.pdf
    262.3 KB · Views: 126
Don't forget the land tax unit trusts have several other advantages such as
- the ability to transfer beneficial ownership of the property by transferring the units with no or little stamp duty - 0.6% now but to be reduced to nil 01 July13.
- the ability to hide ownership as only trustee name appears on title.
- the ability for the trustee to borrow to buy back the units - refinancing principal. This effectively allows you to borrowings to be deductible for private expenses
 
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