Structure for Purchase of IP for group of Friends

[kaiseriqbal]

Hi all,

I posted this thread previously under the Innovative Techniques header, which I think was the wrong place to post this type of stuff.

I have temporarily given up on the purchase of a 2nd IP since the banks do not like lending to a 19 year old with only a $30 K income and a personal loan.

However, I brought up the topic of starting a form of an investment club with 9 other friends (they are between he ages of 22 and 26 and all of them earn above $55K a year and none of them have purchased their First home)

Basically the idea was for each of us to provide $2,000 of initial capital and then provide monthly payments of $150. With this money, we plan to invest in property and shares (prefer property though)

What I am not sure about is which structure we should use to purchase investment properties or trade in shares.

Basically the structure has come down to either being a Company or a unit trust.

With a company, there will be no initial costs, as my Dad was about to deregister his, but I can arrange for the transfer of shares from him to the 10 of us and also appoint ourselves as Directors using ASIC forms (484).

However I had a few other questions and if they could be answered, it would be very helpful.

1. What are the initial costs of setting up a unit trust?
2. By purchasing a property through a trust or a company, will it affect their ability to get FHOG in the future?
3. Is there any difference in Stamp Duty/Land tax between the two structures and how are they determined?
4. To what LVR do the banks lend to Trusts and Companies?
5. In regards to taxation, a Company cannot claim the 50% discount, which a trust can, but are there any other advantages of a company over a trust?
6. How much does a trust cost to maintain every year?

If anyone could help me out with the above, it will be very appreciated.

Thanks guys and gals.

 

[tubs]

Check out this thread:
http://www.somersoft.com/forums/showthread.php?t=53513

 

[Terryw]

There are many things to consider here.

A major one is borrowings. If you have 10 directors it will be a nightmare to try to get future borrowings. THis is because each director will have to guarantee the whole loan amount.

This leads to risk. What if the other 9 directors decide they have had enough and will not contribute anymore? You, the last director standing will be faced with it all.

Same if you had a unit trust with 10 trustees.

But, to answer your questions.
1. Unit trusts can cost about $200+ to set up, plus stamp duty in some states.
2. no
3. There are no differences in stamp duty on land purchase, but land tax may be different depending on the state you are in.
4. same as to persons - up to 95%, but generally 90%
5. Many differences between the 2. A company can offer asset protection if it (not you) is sued. The shareholders are not liable. The company can usually fold without the directors being at risk, but if you have done something illegal then your can suffer various penalties and be personally liable.
5. just a tax return. If the trust owned just one property then it wouldn't be too much. This will be the same with a company, but you will also have the annual ASIC fee of $212.

One advantage of a trust is privacy. With companies the directors and shareholders details are public information. A trust is a private arrangement - and is not governed by ASIC.