Portfolio Structure

Hi all
I really wasnt sure where to post this as it probably fits under Tax and Legal and other sections of the forum.
Ive recently settled on my first IP, with plans over the coming 7-8 years to add another 8-10 properties. My first was purchased under my own name but im wondering how to set up my portfolio from here. My circumstances are: single income earner on a high salary, with 1 child and my goal is to semi-retire in about 10 years, to work just part-time.
At the moment i'm negatively geared but anticipating this to change over the years.
I would like to think that I will hold all (or most) of my properties "forever" - living off the rental income and equity and that I pass the portfolio down to my child when I go to that better place in the sky.
I was thinking of a Trust/Company structure but understand I can't use any of the negative income against my current high income so not sure about this.
Would love anyone's thoughts, ideas or examples of how you've structured.
Many thanks
Kaia
 
If you work as an employee (ie. not self employed or run a business) then most likely benefits from a financial point of view would be in your own name.

Cheers,

The Y-man
 
Thanks Y-Man - what about for succession planning? Am I able to leave that amount of properties to my daughter without any tax or other implications to her - do the titles just transfer over to her? Sounds morbid to think about but want to make sure i set myself up properly from the outset.
thanks
 
Thanks Y-Man - what about for succession planning? Am I able to leave that amount of properties to my daughter without any tax or other implications to her - do the titles just transfer over to her? Sounds morbid to think about but want to make sure i set myself up properly from the outset.
thanks

Hi Kals,

A Trust could be beneficial for your long term property holdings but you may have some losses trapped in the trust for a couple of years until they become positively geared. If you are looking at positively geared properties immediately trusts are a good way to go with a trustee company as you can change the director of the company from you to her at the appropriate time, i.e. before dementia kicks in or just after as long as your short term memory doesn't get too badly affected in the initial stages.
 
Hey

Please note that purchasing land in a trust means land tax from $1.00 and you cannot take advantage of the land tax free threshold (depending on what state you're in).

Agreed that losses would be trapped in a trust - so purchasing negatively geared properties in your own name is not a bad idea.

Also, with trusts - where income is distributed to a minor (i.e. an individual less than 18 yo) the trustee has to pay tax at the top marginal tax rate (46.5%) - so as I understand your daughter is very young, distributing any income where properties are positively geared won't be as beneficial.
 
Please note that purchasing land in a trust means land tax from $1.00 and you cannot take advantage of the land tax free threshold (depending on what state you're in).

True for NSW. Not true for QLD ($360k threshold) or Vic/SA/Tas ($bugger all threshold really).

Also, with trusts - where income is distributed to a minor (i.e. an individual less than 18 yo) the trustee has to pay tax at the top marginal tax rate (46.5%) - so as I understand your daughter is very young, distributing any income where properties are positively geared won't be as beneficial.

Not true. There is a threshold. You can contribute SOME income to a minor who doesn't work for it before it hits this tax rate. It's $416. After $416 of income, you get particularly nasty rates of 66%. There's a table about 3/4 down the following website page:

http://www.ato.gov.au/print.asp?doc=/content/20046.htm

... with explanations.
 
Most trusts only allow for a specific term, I recall something like 80 years. After that time the trust needs to be shut down and the assets sold.

I can't comment on testimentary trust though.
 
True for NSW. Not true for QLD ($360k threshold) or Vic/SA/Tas ($bugger all threshold really).



Not true. There is a threshold. You can contribute SOME income to a minor who doesn't work for it before it hits this tax rate. It's $416. After $416 of income, you get particularly nasty rates of 66%. There's a table about 3/4 down the following website page:

http://www.ato.gov.au/print.asp?doc=/content/20046.htm

... with explanations.

Sorry my bad - income can be distributed without attracting top tax - but the max I understand is one which the low income offset (currently $1,200) covers = 1,200/46.5% = $2,580.
 
True for NSW. Not true for QLD ($360k threshold) or Vic/SA/Tas ($bugger all threshold really).



Not true. There is a threshold. You can contribute SOME income to a minor who doesn't work for it before it hits this tax rate. It's $416. After $416 of income, you get particularly nasty rates of 66%. There's a table about 3/4 down the following website page:

http://www.ato.gov.au/print.asp?doc=/content/20046.htm

... with explanations.


Hi MJ

Are you aware of s98(1) ITAA 1936?
http://www.austlii.edu.au/au/legis/cth/consol_act/itaa1936240/s98.html

INCOME TAX ASSESSMENT ACT 1936 - SECT 98
Liability of trustee

(1) Where a beneficiary of a trust estate who is under a legal disability is presently entitled to a share of the income of the trust estate, the trustee of the trust estate shall be assessed and liable to pay tax in respect of:

(a) so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was a resident; and

(b) so much of that share of the net income of the trust estate as is attributable to a period when the beneficiary was not a resident and is also attributable to sources in Australia;

as if it were the income of an individual and were not subject to any deduction.

-
I would be interested in your take of it
 
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