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| Staff Profile | - Fiona Dunn | ||
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So, you’re buying a property – is a Trust right for you? Traditionally, most investment properties were purchased in the name/s of the individual/s that were acquiring them. Over time, as tax laws, business structures and the financial world has evolved, this has given way to the opportunity for properties to be purchased through other entities such as trusts and companies. Let’s look at these two scenarios when compared to one another: Buying as Individual/s Advantages: rental loss from properties owned by individuals can be offset against taxpayer’s other taxable income; capital losses can be offset against net capital gains made by the taxpayer on other investments; owners/taxpayers are generally eligible to claim the 50% Capital Gains Tax (CGT) discount, provided the eligibility criteria is met. Disadvantages: generally no asset protection – assets owned solely in an individual’s name can be repossessed should they become bankrupt or have a lawsuit filed against them; possible reduction of Family Tax Benefit payments – those eligible for the Family Tax Benefit may lose all or part of their allowance if the amount of extra taxable income generated by the property deems them ineligible. Buying under a Trust Structure There are various types of trusts including Unit Trust, Family Discretionary Trust and Hybrid Trust and each trust has its own specific conditions, tax obligations and concessions. The following generally apply: Advantages: asset protection - should a beneficiary become bankrupt or financially troubled assets owned by the trust cannot be touched by creditors; most trust structures are eligible for the 50% CGT discount; in some trusts there is flexibility regarding the distribution of income and capital.
Disadvantages: transferring properties into a trust triggers
stamp duty and CGT liability; any rental and/or capital loss is
quarantined If applied correctly trust structures can provide significant benefits. It is important to seek independent professional advice before proceeding with any significant financial decisions or transactions. To speak with one of our experienced lawyers or accountants contact us on 1300 QUINNS (1800 784 667) or visit our website www.quinns.com.au and submit an online enquiry. Michael Quinn regularly writes for Your Investment Property magazine. You can view the catalogue of articles on our website at www.quinns.com.au/editorial-features. |
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Disclaimer: The contents of this document titled “The Quintessential Brief” (the ‘Material’) are provided as general information only. It is not intended to be given as advice and should not be relied upon as such. If you are concerned about any issue raised by the Material then you should seek your own professional advice. No warranty is given in relation to the accuracy, currency or completeness of the Material. No reader should act on the basis of any matter contained in this publication without first obtaining specific professional advice. Where applicable, liability is limited by the NSW Solicitors Scheme under the Professional Standards Act 1994 (NSW), and other relevant state legislation. The Quinn Group respects your privacy. Should you not wish to receive this newsletter in the future please contact us on 1300 784 667.