Tax and trust set up for joint ventures

Hi

I am starting our my realestate investment journey and would love some advice on set up and tax on either process.

I have one deal with three partners, one being the cash partner, one being the serviceability partner (that's me) and one being project manager. The aim is to buy one block and sub divide into two blocks in WA, sell off the back vacant block and keep the old house on the front block in the trust as a long term investment. As the title needs to be in the serviceability partner name/trust the purchase will be done in my trust. Currently I have a discretionary trust with a corporate trustee which I was looking at using. This trust has myself and my partner in it only. We will have a loan agreement to the cash partner for the deposit and costs and a joint venture agreement outlining the profits, risks, positions and what ifs. However I believe that since the property is in my trust that my trust will need to pass the profits to myself or my partner to pay tax before it can be passed on as profit share to the other partners (as they are not related). This is going to be either a high cost to me eating into my profit share or something I'll need to factor into the profit share division. Any suggestions and or advice? Am I missing something??? Should I add a company to the beneficiary and pay company tax first?

Otherwise I am thinking of a unit trust might be more suitable??? However thinking unit trusts might complicate the loan process a little more.

Another deal I am looking at doing is a residential build with the land owner in SA. To obtain the loan the title needs to be transferred into my trust. The land owner suggested looking at a unit trust set up. However my knowledge on unit trust is lacking. My understanding is each person owns units in their own name or own trust for extra asset protection. Then each person can sell off the units etc... as they see fit. Tax is only payable on the units that you own. I am looking at this as a quick turn over however I think the other party is looking at buying my units later on to keep as a long term investment.

Open to suggestions and ideas.

I know it will be just easier to do deals on my own. However without withdrawing all my reserves joint ventures allows me to move forward without waiting too long to build up equity/savings.

Thanks in advance.
 
Stop. You cant use your DT that way. The trustee may be assessed at the highest marginal tax rate for the share of profit that isn't yours. A discretionary trust cant distribute to just anyone. Paying others wont be deductible.

I would strongly suggest personal tax advice on the issues incl tax (on the sale of the land) and potentially GST that could occur on the sale of land too. You intend to subdivide and sell for a profit after all.

A UT may be wise but if you change ownership % later it may also work to reduce duty despite a change of % ownership being dutiable in QLD. It may save on CGT costs at that time too.

The UT arrangement you describe may or may not work to change owners without duty. Lots of catches. In SA a transfer of units is dutiable. Normally to circumvent this rule you avoid a transfer by redeeming old units and issue new units. But SA has it covered. A redemption AND a reissue of new units are both pro-rata dutiable. So an anti-avoidance scheme operates in SA so that duty may well be payable when you are being told it won't. Is this other person from another state ?? Sounds like it. Read here : http://www.revenuesa.sa.gov.au/taxes-and-duties/stamp-duties/unit-trusts


I would start with a few hours spent seeking good advice first.
 
Couple of points

Title doesn?t have to be in your name for servicing.

Other ways to split profits are:
Contracting ? owner of land contracts project manager for e.g.
Loans ? which is a contract ? money partner lends money to the owner of the land.

Are the terms of the existing trust suitable for something like this?

Considered 2 trustees as tenants in common? (not recommending it, just pointing it out.

Why would title need to be transferred to your name? Wouldn?t a partial transfer suffice? Especially in it is going to be transferred back to the original owner.

Transfer of units is also a CGT event/
 
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