What structure do you use/recommend, knowing what you now know? Assume a negative geared situation.
References:
1. Property Investors Trust (click here)
References:
1. Property Investors Trust (click here)
What structure do you use/recommend?
- Thread starter mixedup
- Start date
This one is difficult to answer in a general sense. I have a HDT and if I had my time over given my personal circumstances I would have been much better off buying my first few properties in my own name. Having said that Trusts definitely have a place and as my portfolio grows and changes they will come into play again.
mixedup, be aware that you DON'T know what other people know, because they developed that knowledge over the years. The structure decision is really dependent on your personal circumstances, so what is appropriate for one person may not be appropriate for you. Problem is, at this stage you probably don't know enough to evaluate whether advice about structure really takes into account your circumstances.
Personally, I think it's simplest to just buy the first (or even the first couple) in the higher income earner's name. If you end up building a big portfolio, you'll learn as you go what structures are good for you. If you only end up having one or two properties anyway, then buying in your own name is good enoug and won't justify the cost of setting up complex structures.
Alex
Personally, I think it's simplest to just buy the first (or even the first couple) in the higher income earner's name. If you end up building a big portfolio, you'll learn as you go what structures are good for you. If you only end up having one or two properties anyway, then buying in your own name is good enoug and won't justify the cost of setting up complex structures.
Alex
I am quite naive on these things and seems every time I talk to an accountant, things change.
Dale Gatherum Goss has posted here prolifically in the past and is an expert on trusts. Though I believe Dale has retired, but his business would still be worth talking to.
Some things to consider with trusts.
The setup and maintenance costs are significant. Therefore, you need to analyse the benefits vs the costs.
The main benefits are
- you protect your assets a little better if you are vulnerable to being sued personally, as in if you are a doctor.
- you are able to distribute the losses/profits to beneficiaries thus minimizing tax.
If you don't have a low income partner or other beneficiary in mind, then you are sort of stuck with distributing 100% to yourself. hence no benefit.
Also keep in mind that negatively geared assets, eventually become positively geared. In the early days, better to have the losses distributed to the high income earner, and when positively geared, to the low income earner/s.
Trusts don't get the 50% capital gains tax concession, afaik, therefore any distribution or protection advantage needs to be IRR'ed inclusive of that.
Anyway, as I say, you really need to talk to a specialist accountant when you get serious.
Dale Gatherum Goss has posted here prolifically in the past and is an expert on trusts. Though I believe Dale has retired, but his business would still be worth talking to.
Some things to consider with trusts.
The setup and maintenance costs are significant. Therefore, you need to analyse the benefits vs the costs.
The main benefits are
- you protect your assets a little better if you are vulnerable to being sued personally, as in if you are a doctor.
- you are able to distribute the losses/profits to beneficiaries thus minimizing tax.
If you don't have a low income partner or other beneficiary in mind, then you are sort of stuck with distributing 100% to yourself. hence no benefit.
Also keep in mind that negatively geared assets, eventually become positively geared. In the early days, better to have the losses distributed to the high income earner, and when positively geared, to the low income earner/s.
Trusts don't get the 50% capital gains tax concession, afaik, therefore any distribution or protection advantage needs to be IRR'ed inclusive of that.
Anyway, as I say, you really need to talk to a specialist accountant when you get serious.
Actually I'd always assumed when people were concerned about getting sued it was from tenants, and hadn't thought of it from the other way around (i.e. sued as part of your normal job, and then want to ensure they can't get your IPs).
This makes more sense as with Landlord Insurance this should mitigate the financial risk of being sued by a tenant no? (assuming you haven't been negligent)? I don't have a job where I'm likely to be sued (like a Doctor) so normally I should be OK with Landlord Insurance and without a trust?
I'm using a variety of structures, to suit various aspects of my goals and current circumstances. It's a very mixed bag. Having said that, tis then important to look at the costs and benefits of each structure from time to time, to see if they still provide you with what you need. After all, your life's circumstances change over time too. There is no simple answer to this question, and the advice from your accountant and lawyer are very necessary.
Does a hdt qualify for the 50 per cent cgt discount?
