Trust or Don't Trust

[K_Raheja]

Yes, it gets more and more complex the more possibilities which are considered.

I guess this is just one of the ways a trust can earn money to offset losses.

So as Terry says, there are many considerations, and there's not enough information to form an opinion.

So I guess the best advice is to get advice. From somebody who knows this stuff. Not just from a lot of people who you don't know giving you advice.

And that includes this advice.

Any recommendations ? or i guess i can contact Terry after august...

 

[geoffw]

Any recommendations ? or i guess i can contact Terry after august...

I initially got my advice from Dale Gatherum Goss, who was a forum member at the time (Gatherum Goss and Associates I believe still exists but with a different owner. Dale followed his own wealth creation advice so now no longer works for a living AFAIK). Dale wrote a manual on trusts, called Trust Magic. (Trust is a noun, not a verb!)

His son James is a founder of http://houseofwealth.com.au/ and is still a forum member.

They are both in Melbourne.

Edit: I notice a TerryW mentioned on the House of Wealth website.

 

[Aaron_C]

Business income is aimed to be big. That is why you run a business - you don't do it to earn 50k. In any case, it may have worked for you. Doesn't mean it works for others - and I feel that many people get obsessed with structuring to the exclusion of the most important thing - making money.

 

[geoffw]

Business income is aimed to be big. That is why you run a business - you don't do it to earn 50k. In any case, it may have worked for you. Doesn't mean it works for others - and I feel that many people get obsessed with structuring to the exclusion of the most important thing - making money.

That's why I said in a previous post that the best advice is to get advice. It's a complex area with so many different factors. It shouldn't be done without qualified accounting advice- and there are many accountants who would not recommend trusts at all. An accountant though should be able to give proactive advice on investing in investment properties.

 

[Aaron_C]

It is a case of unknown unknowns. Simple PAYG people get the fear of God put in them and start getting trust after trust set up for no real benefit - when realistically the chance of a PAYG worker being sued is pretty minimal.

 

[Deltaberry]

It would have been simpler if I had bit the bullet, purchased maybe one, max 2 properties under my own name and the rest under a trust.

Ah that's exactly what I did. 2 under my name, rest in trust.

Land tax is probably one of the biggest reasons for doing that.

My folks got bad advice when they set their things up, so end up paying $100k+ more every year in land tax than they need to if they had set things up under different trusts.

 

[sanj]

what do you mean - an individual streaming dividends to a loss making trust? And the franking credits would be lost in the trust as well?

terry or coasty will be able to explain better but it is the company/main trading entity (or anything i guess with income coming in) that would stream dividends to the entity that has the negative geared property in it.

im not 100% sure on the technicalities and what class shares or divvies or whatever they have to be as that is what i pay other people to know.

 

[Terry_w]

Dividends are a bit tricky because of the rules regarding losses and Family Trust Elections etc.

But if the trading entity was a trust it could stream profits to another trust which was making a loss - essentially negative gearing.

 

[Terry_w]

I started off with a trust which had a residential property in it. It ran for a few years with the property before the business came along. The financial benefits came about when the property became positive- and then again when we sold it for a healthy profit. If I had bought it in my name the CGT would have been in my own name only, instead of being allocated in the best way.

There were some advantages then which are not available now, but it still would have been beneficial now.

That is good as the trust would have provided a good degree of asset protection.

If you had purchased in your own name and then started a business there is not much you could do.

 

[geoffw]

That is good as the trust would have provided a good degree of asset protection.

If you had purchased in your own name and then started a business there is not much you could do.

Actually I had forgotten our setup. There was never a property in the same trust as a business.

We had one trust with a property in it. Then when the business started we had it in a new trust with a corporate trustee. Then we had to sell the property in the first trust to find setting up a new shop (nearly $300k profit- damn I wish the business income was that sort of number)- the new business was put into the original trust which no longer had a property- although we had to put in a corporate trustee.

 

[devank]

We have decided to buy in our own names until we hit the land-tax threshold for few reasons.
1. Higher interest rates
2. Accounting requirements - Paper works (Trust + Trustee company)
3. Land-tax
4. Our jobs are not risky.
5. All props are managed by PMs and fully insured
6. Don't neglect any tenant's requests
7. Complexity in getting a loan.

We have a small (tiny) business. We moved that under a trust (+ trustee company). There is a set up fees, annual fees, accounting fees... etc. Need to answer accountant's questions. It is a bit hassle.

We reached the land-tax threshold in NSW but there is a LONG way to go in other states. So why make this complicated.

 

[Xjas]

Like the OP I have been having difficulty deciding which way to go but I have found it is very much dependant on your personal circumstances and long term goals. Trusts seem to come in many shapes and forms what is great for one person may be total wrong for someone else.

After speaking to various people about trusts I have one word of warning, If you are paying for advice, you are most likely getting advice, if you are not paying for advice you are most likely getting a sales pitch rather than advice.

BTW of the people I spoke to I found Terry_w easy to talk to and understand, well worth what it cost for his advice.

 

[melzinoz]

My accountant told me because of costs involved and our low risk (non business owners) that it would only be beneficial to look at a trust when we reach the land tax threshold...But there was also alot of other factors involved such as income and how its balanced and the gearing of properties etc etc....