In whose name should the title of the property be in?
* Single Name
* Joint Name
* Tenants in Common
* Family or Unit Trust/s
* Self-Managed Super Fund
This decision alone is probably the most important one you will make for the entire venture and getting it wrong could cost you thousands of dollars in missed tax benefits and/or capital gains tax concessions.
The first two are problematic for a couple of reasons. They provide no asset protection and no flexibility. As time goes by and your circumstances change, we will rely on that flexibility to ensure that you are always in a strong position to achieve your goals. The company is not good because there is a potential for asset sales to be taxed twice…
A trust can provide:
* Asset protection
* Tax benefits
It is also a structure that the wealthy people use to own assets that produce wealth. Hence, we wish to achieve the same results that the wealthy people achieve we really should do the same things that they do…and this is to use trusts to own the assets. When we look at trusts, there are really only three types of trust:
* A family or discretionary trust
* A unit trust
* A hybrid trust, which is a cross between the first two.
A family trust works well when we buy businesses or cash flow positive assets. It is not good when the assets are negatively geared as the losses are trapped within the trust and carried forward to absorb future profits. In this way, the individuals do not gain any tax benefits from negative gearing.
A unit trust works well when two (or more) unrelated parties buy assets together. There is no real advantage in using a unit trust within a single family unit as we lose the discretionary features or benefits that are available to help reduce the family tax.
A hybrid trust is best when the one family wants to buy assets that may be negatively geared as it enables the assets to be owned by the trust, but the individual to benefit from negative gearing against their other income such as salary.
Contact Prosperity Accountants team today at firstname.lastname@example.org or call +61 8 9443 5199 for assistance.