Strategies for property investors to avoid paying too much tax

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 investments.

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 income.

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 names.


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Marlene Liontis
Wednesday, 12 February 2020

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