Property investment for legacy seeking investors will often include what we might term structural establishment – read here using a company or a trust.
For those looking for a champagne outcome on a beer budget, the option of using trusts and other entities, designed to limit risk with the added potential ability to avoid or dissipate capital gains tax across the family rather than in one lap, can appear costly. In my experience, one of the most misunderstood concepts in structuring investments is the cost versus benefit analysis, especially when it comes to land tax.
Land tax is a state government imposed tax on land owners and it differs in scale and imposition depending on which state you own property. Generally your principal place of residence is exempt.
Thresholds (the value at which the tax kicks in) for individual taxpayers, also differ between states and trusts, particularly discretionary or family trusts because of the indeterminate distribution base ie the trustee directs the income where they feel is prudent, do not generally enjoy any tax free threshold. So this means rather than perhaps not paying land tax as an individual or partnership, land tax becomes an immediate cost of the investment.
So, to trust or not to trust. There is no, one perfect answer, and there will certainly be times where the use of a trust will not be prudent, whereas in others it will be the best course of action. How do we know, we don’t, until we understand your “WHY”. The best advice comes from the full understanding of what you really want to achieve.
Whilst trusts can appear “costly” to set up, administer and with the added land tax may seem an overly expensive strategy in your pursuit of wealth, but there will be rainy days ahead, even if it is only a sale and capital gains tax issue. The income tax that can be saved through spreading a profit amongst many individual taxpayers may far outweigh any short term costs involved in “getting there”.
Our catchcry is “Your legacy is Our inspiration” and our approach based on what inspires you, will make your legacy seem so much easier to achieve. We are easily contacted by going to our website www.propertyportfoliosolutions.com.au where the start or even the continuation of your property portfolio is made simple.
