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Accounting – Property Investors .

If you are a Property Investor, You Should Ask Yourself These Questions …

Does any of the following apply to you:

  • You own property in your own name (or your partner's name) and have a lot of equity, eg. worth $600,000 and only a $100,000 mortgage
  • You own investment property in a family trust but have no way to claim your negative gearing deductions
  • You own investment property and don’t claim all the expenses on your properties, eg. repairs, building write off

If you are in ANY of these situations, then not only are you at SERIOUS risk of losing your property in a lawsuit (ESPECIALLY if you are in business), but you will be paying far too much tax.

To put it simply, if you don't own your property in a trust, or use second mortgages, you have minimal or no asset protection.

To learn more about asset protection, go to our Blog, or Click Here or you can read our frequently asked questions on asset protection, Click Here 

But I am not in Business at the Moment!

That may be so. But things change. And if you go into business and decide to move your property into trusts to protect them, at worst, you’ll have massive stamp duty and capital gains tax costs to deal with, as well as a 5 year wait before your asset protection plan works. At best, you’ll have huge costs and taxes to do the restructure, administrative inconvenience in your business, and a 5 year wait before your protection plan works.

So it’s good to get your properties properly protected today.

To learn more about asset protection, go to our Blog, or Click Here or you can read our frequently asked questions on asset protection, Click Here

What if I already have Property in my Own Name?

To put it simply, if you have property in your own name, and have a lot of equity, your properties are at serious risk.

Some say you can transfer assets into a family trust, which you can. However, you will be liable for capital gains tax and stamp duty, as well as having 5 years to wait under bankruptcy law before the strategy can be legally effective.

What you can do, however, is a strategy on second mortgages to protect your assets. To find out more about these second mortgage and other strategies, Click Here

I Have Heard That You Lose Your Negative Gearing Tax Benefits if I Hold my Property in a Family Trust. Is That True?

Yes that is true (subject to two exceptions).

In a family discretionary trust, you will lose your negative gearing benefits because
you have to claim them in the trust, not in your own name.

This is a problem if you are a high income earner.

There are three ways to avoid this:

  • Multiple Trusts. If you earn income from share trading or internet marketing or any business income through the same trust as your negatively geared property, or through other trusts, you can shift some or all of that income into your property trust to offset against the negatively geared property loss. So for example, if you have a $15,000 negative gearing loss, and you make a profit of $20,000 from share trading in another trust, just shift $15,000 of that income into the property trust, and you will only pay tax on $5,000.
  • Hybrid Trust. This is discussed below.
  • Family Discretionary Trust with Loan Agreement. You borrow the money in the name of the high income earner and lend it into the trust at a commercial interest rate.

Speak to one of our specialists further about these options.

What about Hybrid Trusts? I have heard they are great .

Hybrid trusts are basically a unit trust with the ability to have discretionary income units. They are used mainly to get the benefits of protecting assets, and claiming negative gearing deductions which are otherwise trapped in your family trust (hence solving the problem which I have outlined above).

That is, one problem with buying a property in a family trust is you often can't claim your negative gearing deductions. Many accountants say to solve this problem, you buy your property in a hybrid trust. In a hybrid trust, you don’t own the property, you only control it (giving you asset protection), and you’re entitled to get all the income from the property.

In effect, what happens is you can claim your negative gearing deductions.

As the 2008 tax audits showed (which we predicted would happen), many hybrid trusts were disallowed as being a tax avoidance scheme. (Not ALL hybrid trusts had this problem, but many of them did …) So they’re not something we recommend.

If you have a hybrid trust, check with us, and we can advise if you have a problem.

Can you help me do my tax return and ensure I claim the most tax back that I am allowed to so by law?

Yes we sure can.

Click here to find out more about our Accounting/Tax Return Services

 

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