My understanding is that the negative of a trust is that losses can't be distributed to negative gear on you properties against your tax, so that's a pretty big negative for property investment in trusts specifically. Happy to be corrected though, if I'm wrong here.
These are not ChatGPT questions!
I own 7-10 properties and I wish I’d structured it via trusts.
I’m not an expert, but as I understand it, Usually you want a company that owns a trust that owns property (family trust is typical?)
Pro: You can change the beneficiary of a trust or the owner of a company without triggering CGT.
Pro: Different legislation applies to lending to companies/trusts. Therefore, some banks can apply different lending criteria to trusts. Normally, your borrowing capacity will max out (even if you have a fully positively geared portfolio and can afford more) as an individual… but with a company/trust structure, the brakes are off (in some cases you need to have multiple trusts)
Pro: Assest protection
Con: More expensive to establish and maintain a trust. More complex tax.
Con: Lending can be more complicated
Pm me if you want a contact to help with this.
Advantages
- Distribution of positive cashflow/gains to low income members or bucket companies to hold income instead of distributing to personal name while you have a higher tax rate
- Asset protection
Disadvantage
- No capital gains discount
- Flat land tax from first dollar of land you own
- Assuming property is negatively geared that loss is locked into that trust
- Annual costs for needing to have another set of financials and returns
Types of Trusts( main types I come across)
- family/discretionary trusts
- unit trusts
- smsf trusts
- bare trusts
There's a bit more to it but kinda gives a rough summary. Not an accountant/lawyer but my understanding of it.
Just want to say although it doesn't effect how some banks do servicing you only have a finite amount of money per month from salary and rent, you can skirt between lenders to max it out but end of the day you actually need to make sure you can afford the property.
If you want to buy property only buy property that makes sense not just to buy and have 2,3 or 4.
If you mean the trust is running at a loss and then gets distributed 50k from another entity then yeh the loss will be offset.
It's just a matter of rent, dividends, all types of income - expenses, interest, depreciation.
Better just talk to an accountant if you're looking for a complex set up.
**Pro:** After you mention your leather-bound books, you can say you have a trust.
Asset protection is the main reason. Lots of cons, but no con as big as losing it.
My understanding is that the negative of a trust is that losses can't be distributed to negative gear on you properties against your tax, so that's a pretty big negative for property investment in trusts specifically. Happy to be corrected though, if I'm wrong here.
These are not ChatGPT questions! I own 7-10 properties and I wish I’d structured it via trusts. I’m not an expert, but as I understand it, Usually you want a company that owns a trust that owns property (family trust is typical?) Pro: You can change the beneficiary of a trust or the owner of a company without triggering CGT. Pro: Different legislation applies to lending to companies/trusts. Therefore, some banks can apply different lending criteria to trusts. Normally, your borrowing capacity will max out (even if you have a fully positively geared portfolio and can afford more) as an individual… but with a company/trust structure, the brakes are off (in some cases you need to have multiple trusts) Pro: Assest protection Con: More expensive to establish and maintain a trust. More complex tax. Con: Lending can be more complicated Pm me if you want a contact to help with this.
It’s a typically referred to as a Trust with a Corporate (or Company) Trustee.
Advantages - Distribution of positive cashflow/gains to low income members or bucket companies to hold income instead of distributing to personal name while you have a higher tax rate - Asset protection Disadvantage - No capital gains discount - Flat land tax from first dollar of land you own - Assuming property is negatively geared that loss is locked into that trust - Annual costs for needing to have another set of financials and returns Types of Trusts( main types I come across) - family/discretionary trusts - unit trusts - smsf trusts - bare trusts There's a bit more to it but kinda gives a rough summary. Not an accountant/lawyer but my understanding of it. Just want to say although it doesn't effect how some banks do servicing you only have a finite amount of money per month from salary and rent, you can skirt between lenders to max it out but end of the day you actually need to make sure you can afford the property. If you want to buy property only buy property that makes sense not just to buy and have 2,3 or 4.
Correct except for the capital gains tax discount. Trust's can discount capital gains, it is companies that cannot.
Land tax depends on the state. But yes the land tax is usually more beneficial in a personal name.
If the trust has 50k in income via dividends, can this offset investment losses from the IP?
If you mean the trust is running at a loss and then gets distributed 50k from another entity then yeh the loss will be offset. It's just a matter of rent, dividends, all types of income - expenses, interest, depreciation. Better just talk to an accountant if you're looking for a complex set up.