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Anonymous
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From: Anonymous
Hi all,
For months now I've been reading numerous investment books (including dale's tax battles manual) and surfing through this forum. I decided I need a good accountant and for the last 2 weeks have interviewed 2 in sydney (where I live). Based on my reading so far and info I've gained from this forum, I've asked both accountants questions along the following lines to see if they're right for me:
1. Do you personally own investment property?
2. What do you think about a family trust for my wife and I?
3. Did you know that offset accounts are useful tools in that they don't ruin the tax deductible amount of an investment loan when you withdraw money from the account for personal purposes?
The accountant I saw yesterday threw me for a loop. He knew about the benefits of an offset account, which was good as the first one kept telling me I was wrong on that point. But he quite proudly told me that he himself didn't own any investment property whatsoever. Then he told me that my interest in using a family trust was misplaced.
My wife is soon to be a doctor, and I am an engineer (on highest marginal tax rate). So he kept saying that we should just invest everything in my name as I am unlikely to ever be sued but my wife is certainly at a higher risk. When I asked him what happens when any negatively geared properties start to become positively geared (and hence I lose the tax deductions), he just said to borrow more money to become negatively geared again. (I'm still thinking through this one...any comments from anyone?)
We're not sure if we want children. So he said that if we never have children, and we're both eventually going to be on the highest marginal tax rate, then there really isn't anyone to distribute the money to with a trust in order to minimise tax. Which I suppose is true (please correct me if I am wrong).
But then again, what happens when we've accumulated heaps of investments in my name only, and it comes time for us wanting to retire on the passive income from those investments. Won't I be heavily taxed then, with no way to distribute money to my wife to reduce tax? But this accountant I saw yesterday said that at that point we then create a trust. I asked him about the costs involved in transferring assets into the trust, and he acknowledged there'd be stamp duty etc to pay, but didn't elaborate any further. He also told me that a trust would mean I would need to pay land tax straight away (which I know is true) but without investing through a trust we could avoid this for a while at least (admittedly I'm not sure about that one).
basically, his main argument was that is was much cheaper to achieve the protection beneftis of a trust by simply investing only in my name, and that the tax minimisation benefits to be gained from a trust were negligible for my wife and I. He seemed to suggest a trust is only worthwhile when you've got a chunk of money all at once. eg, he said he set up a trust once for a client because he won a million dollars in lotto. I think he was trying to tell me that trusts were only for the wealthy. He seemed to completely miss the point that the intention of my wife and I WAS to be wealthy one day, even though we're just starting out at the moment. And he also quite proudly told me that he doesn't have a trust but just puts all of his investments in his wife's name (shares and managed funds only) and into his superannuation.
Please, can anyone tell me of a good accountant in sydney??? Anyone with any comments about what this accountant has told me??? I'm a bit angry as my wife (who hasn't done all of the reading on investments that I have) is really against the idea of using a family trust now.
Ethan
Hi all,
For months now I've been reading numerous investment books (including dale's tax battles manual) and surfing through this forum. I decided I need a good accountant and for the last 2 weeks have interviewed 2 in sydney (where I live). Based on my reading so far and info I've gained from this forum, I've asked both accountants questions along the following lines to see if they're right for me:
1. Do you personally own investment property?
2. What do you think about a family trust for my wife and I?
3. Did you know that offset accounts are useful tools in that they don't ruin the tax deductible amount of an investment loan when you withdraw money from the account for personal purposes?
The accountant I saw yesterday threw me for a loop. He knew about the benefits of an offset account, which was good as the first one kept telling me I was wrong on that point. But he quite proudly told me that he himself didn't own any investment property whatsoever. Then he told me that my interest in using a family trust was misplaced.
My wife is soon to be a doctor, and I am an engineer (on highest marginal tax rate). So he kept saying that we should just invest everything in my name as I am unlikely to ever be sued but my wife is certainly at a higher risk. When I asked him what happens when any negatively geared properties start to become positively geared (and hence I lose the tax deductions), he just said to borrow more money to become negatively geared again. (I'm still thinking through this one...any comments from anyone?)
We're not sure if we want children. So he said that if we never have children, and we're both eventually going to be on the highest marginal tax rate, then there really isn't anyone to distribute the money to with a trust in order to minimise tax. Which I suppose is true (please correct me if I am wrong).
But then again, what happens when we've accumulated heaps of investments in my name only, and it comes time for us wanting to retire on the passive income from those investments. Won't I be heavily taxed then, with no way to distribute money to my wife to reduce tax? But this accountant I saw yesterday said that at that point we then create a trust. I asked him about the costs involved in transferring assets into the trust, and he acknowledged there'd be stamp duty etc to pay, but didn't elaborate any further. He also told me that a trust would mean I would need to pay land tax straight away (which I know is true) but without investing through a trust we could avoid this for a while at least (admittedly I'm not sure about that one).
basically, his main argument was that is was much cheaper to achieve the protection beneftis of a trust by simply investing only in my name, and that the tax minimisation benefits to be gained from a trust were negligible for my wife and I. He seemed to suggest a trust is only worthwhile when you've got a chunk of money all at once. eg, he said he set up a trust once for a client because he won a million dollars in lotto. I think he was trying to tell me that trusts were only for the wealthy. He seemed to completely miss the point that the intention of my wife and I WAS to be wealthy one day, even though we're just starting out at the moment. And he also quite proudly told me that he doesn't have a trust but just puts all of his investments in his wife's name (shares and managed funds only) and into his superannuation.
Please, can anyone tell me of a good accountant in sydney??? Anyone with any comments about what this accountant has told me??? I'm a bit angry as my wife (who hasn't done all of the reading on investments that I have) is really against the idea of using a family trust now.
Ethan
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