As already discussed, there are things you can do.
You can transfer assets into a family trust or company or other structure, but you will be liable for stamp duty and (probably) capital gains tax, as well as having a 5 year clawback period under the bankruptcy laws. Or alternatively, you can set up family trusts, or companies, and use these structures to take a second mortgages or caveat over your assets.
We discuss second mortgages in this page. We take the family home and use this as an example. We will look briefly at investment properties further down.
For every family, your main asset is your family home. And most commonly, the family home is bought in your own name, or more commonly, in joint names.
The issue arises, how would you protect your family home?
Let’s take an example of a family home worth $1 million where you have little or no debt but is in your own name. Clearly if someone sues you in business, your family home is at risk.
There are three ways you can protect your home from golddigging creditors …
Firstly, if you’re married or in a serious relationship (such as de facto), you can put your family home in the name of the person with a lower risk of being sued. For example, if a doctor is married to a retail shop employee, the retail shop employee is at lower risk of being sued. So he or she (the retail shop employee) would own the property in their own name.
Secondly, you could transfer the family home into a family trust managed by a corporate trustee. However, this will not only requires you to pay stamp duty upon the transfer but also means your home will no longer qualify as your principal place of residence. Consequently you couldn’t claim any capital gains tax (CGT) and land tax exemptions in relation to this property.
Thirdly, you can use a second mortgage or caveat strategy. That is, create debt to protect your home. By securing the majority of your equity in your house by a second mortgage, the property will appear fully encumbered. This will make your home far less attractive to potential creditors. In fact, it is well known in liquidations and bankruptcies as soon as the trustee in bankruptcy or liquidator (or the ATO) sees a second mortgage, they are less inclined to go after the house due to costs and inconvenience.
One big benefit of this strategy compared to the second option is it is considerably cheaper. It allows you to keep your home as your principal place of residence, and have the CGT and land tax exemptions, while still getting significant asset protection.
There are a few steps involved. These are:
Step 1: Set up a Discretionary (Family) Trust
You can set up a family trust which through a series of transactions, will take a mortgage over your property. There are 2 ways you can do this:
Keep in mind with 2, it may not be enforceable (although it is still a very effective smokescreen … please contact us to discuss further). Therefore, we are focusing on 1 in this article.
The great thing with a family trust is no single beneficiary (or group of beneficiaries) has any claim to the assets of the trust, ie. nobody actually owns the assets of the family trust. Therefore, in a lawsuit, or if you go bankrupt or have the government after your assets, in most cases the assets in the trust don’t form part of your personal assets, and aren’t available to your creditors.
You can use an existing family trust, but it depends on the situation.
To find out more about family trusts, Click Here.
Step 2: Get access to funds
It is always better, as stated above, to get access to real funds. You can do this by:
To work out the best way for you, you should get professional advice.
Step 3: Make a Gift into the Trust
From there, you draw your funds, and put the cash into the family trust as a gift. The money should be physically transferred into the bank account of the trust.
Step 4: The trust lends the money back
The trust immediately pays the money back physically to you as an individual, but does it as a loan. The loan is then secured by a second mortgage over your family home, which you get a property lawyer to prepare, and have registered at the Land Titles Office.
If done properly, subject to some clawback rules for bankruptcy purposes, the trust ranks above all other creditors if you are sued, even though it is in your name and is your asset. (If you have a bank mortgage over the property, this gets first priority.)
The beauty of this is you keep your principal residence exemption for CGT purposes, and also land tax exemptions for the property. And you get asset protection almost as good as if you directly transferred the property into the trust itself, but at a lower cost.
You get your cake and eat it too!
WARNING: It is critical you get professional advice before doing this. Under bankruptcy law and other laws, there are provisions against defrauding creditors in certain situations. Although this can be done in a way which does not fall foul of these provisions, you should get it checked thoroughly first.
As a comment, the strategy works very well with a family home, because you retain CGT exemption and land tax benefits, and avoid stamp duty. With investment properties, as you’d be liable to pay CGT and land tax anyway, the major benefit is stamp duty. Nevertheless, this can be significant.
The principles apply similarly to investment properties as for a family home.
Complete the below form to discuss your options with us.
After a thorough analysis of your data and unique circumstances we advise you of all oppotunities. We guide you towards the best path and take control of implementation. Through every stage, we ensure full tax compliance and ongoing support.
It's a no-obligation risk-free assessment with a full money back guarantee (conditions apply).
Financially modelling your situation. We present your options and outline the possible tax savings.
We provide a written report with options to minimise your tax along with our recommendations.
WWe have a follow up meeting and create a strategic tax plan based on your choices.
We outline the process, costs and tax savings, and what you need to do from your side.
We fully implement your tax plan to ensure you meet all local and international legal requirements.
For those moving overseas to flee the Australian tax robbers, we help in the whole process from beginning to end.
Our service continues after we've implemented everything for you. We provide ongoing training to update you on changes as well as providing options to work with us on an ongoing basis.
Brilliant service!! Could not have asked for a better start to getting my business structure. This world is still completely new to me and I am very impressed with all the resources Warren and the entire team at Wealth Safe have provided to help me understand trusts
Living overseas, with no structures or assets in Australia anymore, it simply didn't make sense to keep paying into their tax system. Thanks to Warren and his team, they guided me through the process of setting up stable business structures, and making sure all the lawyers agreements and professional advise was documented. This ensured I met the obligations of the ATO and was 100% legally compliant with my obligations. I researched my options, and felt secure that WealthSafe took all precautions to ensure I was doing the right thing, and benefitting financially at the same time
After getting so much conflicting advice from other sources, we were completely confused. Being global business owners, we needed both Australian and international advice, so we reached out to War ren to help us understand exactly how we could structure our businesses to ensure we were well protected. It was vital to us that our future growth and decisions were taken into account. Not only did Warren give us the highest quality advice, and go above and beyond in ensuring we understood the full spectrum of what we were putting in place, but he has always been available for follow up questions, is always happy to get us on the phone for clarification, and he has shared the expertise in his team with us. At first, we have to be honest, we were really concerned about spending money on a consultation. The outcome is although not cheap, it is the best money we have ever spent. We can see significant savings, know we are structured well, have a fully dedicated and professional team behind us and have expert advice available when we need it. We can’t recommend Warren and the Wealth Safe team enough. Thank you
CV from Canada
He is very professional, knowledgeable and creative with his tax planning strategies, and very attentive in answering your questions and working with you to find the best set up for your individual situation. I feel confident working with him and his team, and his level of expertise is outstanding. I wouldn't trust any other company, and would highly recommend Warren Black and Wealth Safe to protect your assets
Although I thought the result I had figured out with my accountant were the most tax effective way I could setup myself up. I was in a position where I would have to pay 31k in tax. Warren found something in how I was setup, which turned my situation around to getting $15k returned to me. It's a $46k turn around.
Warren was able to set me up, and help me look forward to further tax reductions for the future. Also for improved asset protection. Warren also did bloodline wills for me and my wife. Full Review Here
I'm in the mining industry and run a small trading business. I had a tricky situation I had to get out of. I had default on my credit files. I got Warren on the job, he loves that sort of challenge. He didn't even charge me full price, he was excited at the challenge of helping me out. He succeeded and got rid of my default! I get Warren to do all my work now. I would recommend him to anyone
John G from Sydney
I run a small business. I was concerned about safeguarding my assets, myself and my family, and the amount of tax I was paying, but I also wanted to be legal and not get into trouble. Warren was able to provide me with a structure that protected me and my family and my assets and also helped to significantly and legally reduce the tax that I had to pay. Sure I had to pay and they aren’t the cheapest nor the most expensive, however it was well worth the fees paid. I certainly feel more comfortable and secure now
They were able to walk me through the whole process, even a tax dummy like myself.... I was very very impressed with the level of service. It was really end to end. They were always there to answer questions, help me complete paperwork and connected me with all the right people. I can't recommend Warren and Wealthsafe highly enough Full Review Here
Virna, Warren and the Wealth safe team have provided us with a professional and efficient experience helping us to identify and create a customised financial structure to suit our needs. They clearly have a great deal of knowledge regarding taxation in Australia. Also Warren's seminars have been of great help. We absolutely would recommend their services and are forever grateful for help and advise provided
I am a doctor (GP) who was making a good income, however, I was highly dissatisfied with the high amount of tax I was paying, and also feeling a little lost and frustrated in my life in general. I signed up to work with Warren and his team at Wealth Safe. It was one of the best things I have ever done. Firstly, I got quality advice on my tax and was restructured and legally was able to minimize my tax and get on top of it. Secondly, I joined his mastermind and got some personal mentoring, which was significant. It helped me shift a lot of mental and spiritual blocks, and financial imprints which seemed to be blocking moving forward and making major decisions. I learned also how to manifest and create what I wanted rather than what I don’t want, and I have even manifested a wonderful relationship with a very supportive partner. So all round, a great decision. Thanks Warren, and I would recommend Wealth Safe and Warren’s tax advice service and manifestation and imprint clearing to anyone!
I worked with Warren Black to open a Hong Kong corporation during the summer of 2018. Warren came highly recommended from my business contacts, who said that he was honest, trustworthy, and very knowledgable. I have to agree. My experience working with Warren was very good. Warren was extremely attentive to my questions, replying with solid answers in less than a day. He also took the time to explain options and rules in detail. When faced with some unique challenges that most businesses don't face, Warren was quick to roll up his sleeves, take action, and even put me in touch with his team so the process could move forward rapidly. This was above and beyond what I expected. To top it off, I found him very personable and really a pleasure to work with. If anyone is looking at a business entity in Hong Kong or Malta, I highly recommend Warren Black.
Warren, Virna and the team at Wealth Safe were fantastic in helping me set up multiple business structures overseas. They were always willing to have a chat on the phone whenever I felt like I needed extra help and they always replied quickly to my emails. The advice and structure set up was tailored to what I wanted to achieve and the whole process was easy and straight forward. I would 100% recommend utilizing their knowledge and expertise in setting up overseas and creating the life that you want to live :) I can't thank them enough.
Speak with our team about your tax situation and see how we can put more money in your pocket. See if you qualify for a strategy session to discover what we can do for you. Simply click the adjacent button and complete the enquiry form.