It is very important for property investors to consider careful how their property portfolio is structured and the implications of land tax on their returns.
When it comes to the best kind of structure to minimise tax,
one of the best vehicles is a Discretionary Trust, as it provides income
distribution options and splits capital gains among beneficiaries.
The trustees decide annually, which beneficiaries receive
distribution and how much and what class of income they will get.
On the other hand, owning a property as an individual, joint
tenants or tenants in common, doesn’t provide any discretion on how net rent or
capital gain will be distributed.
However any losses could be offset against an individuals’
salary and wage income.
One of the limitations with trusts however, is that if a
property is negatively geared and held inside a trust , with no other incoming
income, losses can’t be used by the beneficiaries to offset other income.
The loss is then carried forward inside the trust, until the
trust has a profit, subject to carry forward loss tests.
Trusts are best used if you are building a property
portfolio for long-term investing, with the trust being the owner of all the
Some of the properties can be negatively geared and some cam
be positively geared, to make the most effective use of losses to minimise tax.
If you own a business, a discretionary trust can own the
shares in the company that runs the business. The trust can receive dividends
from the company and also offset any losses on the property against this
Also, ask your accountant about the land tax threshold in
your State and the implications for your portfolio and if there are ways to
minimise the land tax, for instance, having different properties in different
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Wednesday, 12 February 2020