Selecting the right property ownership structure can mean the difference between success and failure within your portfolio, but firstly before I get started let me make something very clear, I am not and accountant, nor a lawyer and you should seek professional advice and guidance specific to your situation and not rely on this article.
There is no one-size-fits-all solution when it comes to structure, everyone’s personal taxation situation is different, each property is different, and also your strategy will be different.
When I talk about ownership structure I am talking about the entity used to purchase and own a property, for example you might purchase a property within your own name, a company, a trust be that a discretionary or unit trust, Partnership, Self-Management Super Fund (SMSF) and this list goes on.
So why is this so important? Well firstly although it’s not impossible to change ownership after a property is purchased it can unlock all kinds of issues such as purchase Duty, Capital gains taxes etc. So getting it right the first time I very important.
If we look at what key issues you need to consider before purchasing a property the following come to mind:
- Taxation; A tax efficient structure can assist with your overall taxation situation and strategy perhaps land tax has become an issue as your portfolio grows the right structure might assist with mitigating that? But keep in mind taxation benefits should never be the only influence in your decision to put a property is a certain structure there are other things to consider as well.
- Asset Protection; different purchasing entities can act as silos keeping each asset protected from litigation and risk this is another key reason for diversifying ownership structures. Have you ever heard the saying done have all your eggs in one basket?
- Estate Planning and Succession; Different structures have different effects on your estate planning, none of us live forever, so planning for the inevitable is important. Questions like, who will take control of your property when you die? Who do you want to benefit from your hard work?
- Multiple parties; Sometimes your might have different people wanting to get in on the action of owning a property, possibly a development site? Different trust structures such as unit trusts might be the way to go? But again speak with your solicitor and accountant.
If you would like further assistance with these kind decisions then get in touch with the team at Hot Property Buyers Agency today, we can introduce you to our preferred affiliates that can help get you on the right track.