Trust or Not - for negative geared IPs

I plan to set up a Family Discretionary Trust for our next Ips . The more I read about Trust the more I get confused and wonder if it is the right decision. It’s good for asset protection but for buying a negative cash flow IP it may not be feasible.

Unlike other states, in ACT we claim Stamp Duty/solicitor’s fee at the end of the 1st financial year . For a $500K property the stamp duty will be over $20K, land tax : $4.5K, Rates/water : 2.5K . If we put in $100K and with around $400/week rent we will have to put in approx $18K /yr before tax. It means the Trust will be $40K in red after the 1st year.

I’m still not 100% sure but we may renovate and move in that house in 3 years time.

How long does it take to set up a Trust and is there any good accountant in ACT who can assist us? I think my accountant overcharges a bit.

I would greatly appreciate your advice.



Regards

Huey
 
Do a search on hybrid discretionary trusts if you're thinking about negative gearing. Also known as HDT's.
 
Alternatively, consider taking equity from the IPs and investing it in a high-cashflow vehicle to help offset the holding costs.
 
Yep, I think you need a HDT as your 'trading entity' and channel the product down into your FT later. Don't worry, I am also still confused but with the HDT, you can get the gearing benefits but must carry FWD any losses.

I used a big Sydney Law firm. They had all out (Trustee Co. + DT+ HDT) within 2 - 3 days, I returned with cheques etc and all was returned within 48 hours.

Do search on the net for 'Hybrid Trust' or 'Trust Documents' and your state etc and you will get loads of Law firms in the hit list. They all seem to charge similar fees. Beware of your local accountants or lawyers if they are not experts. This is a specialist field .... so use a specialist.

Good Luck

SW
 
Thanks, I read about HT in this forum in the past but thought it's not for us as it is ... too complicated for an old & frail grandma like me to understand and manage. However I will read through again.

Regards

Huey
 
Hi Aceyducey,

Sorry, it came at the right time for me but I missed it. I've just been back from Sydney. I have to decide on the structure in the next few days.

Can someone shares notes from the talk with us?

Regards

Huey
 
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