Help me to Retire

Are you struggling to make those extra cash payments into your investment property loan(s) every month on your negatively geared property?  Or is worrying about this exact problem stopping you from taking that first leap into property investment?
Then never fear. As some of you might know you can apply to the tax office to have the amount of tax taken out of your pay packet every week lowered to match your expected return at the end of the financial year.
Basically you are given your expected tax return negative gearing benefits through out the year rather than a lump sum at the end of the financial year after you’ve put in your tax return.
It’s called the PAYG income tax witholding variation (ITWV) application. So with the help of your accountant (or do it yourself if your handy with numbers) you can fill out one of these forms online or hard copy and get your self a bit of payment relief every week.  Be sure you try and estimate as closely as possible, as any money you over estimate will have to be paid back once your tax return for that year has been made final.

Heres the link to this years form.

Wealth Retreat 2007 will be held on the Gold Coast in May (the 2nd -5th). Wealth Retreat is not for everyone and not for begining investors. It is designed for people who are already well on their way but want to take their investing to the next level.

“If you want to learn about advanced tax structures, innovative superannuation advice and sophisticated investment strategies, then Wealth Retreat 2007 is for you.”

If you are at this level then check out the site and register your interest for Wealth Retreat 2007.

If you don’t think you are quite at that level but would like to know some more and get some free information about property investing, trusts and taxes then your in luck, because the Wealth Retreat website has 3 MP3 downloads available of 3 separate tele-seminars that were recently held.

1. Hear Michael Yardney explain how to take advantage of the opportunities the next property boom will bring.
2. Hear tax expert Tony Melvin explain how property investors can benefit from using trusts + lots more.
3. Hear tax expert Ed Chan answer questions from the audience on property investment.

Head on over to the site to download these. Note, in total there is about 165MB to download… I hope you have broadband

This question remained in a state of confusion, mystery and frustration for me for several years.
Just like most new people to the world of property investing I didn’t even consider structure when I bought my first property. It was just put in Joint tenants, 50/50 mine and my wifes. Years later when I sold this piece of land it cost us thousands of dollars in extra capital gains tax due to the lack of structure set up. Also at risk during the whole time I owned this property was everything my wife and I owned. If we had have been sued for something happening on our investment property, everything we owned would have been up for grabs as we had no asset protection with the property in our own names.

As I’ve outlined above, the 2 main advantages of setting up a structure for your property investing and not putting them in your own name are:

1. Tax benefits
2. Asset Protection

So when I say structure, what do I mean and what types of structures are available?
This is originally where I got confused, and it is still very easy to get confused as you will be told many different ways by different people. Basically the structure options that are available are:

• Company
• Trusts (there are dozens of types)
• Discretionary (Family Trust)
• Unit Trust
• Hybrid Trust (A cross between the above 2)
• Self Managed Superannuation Fund

With a Company, you pay a flat rate of tax of 30%. It offers some asset protection, but losses such as negative gearing are trapped in the company and cannot be claimed by the individuals. You also miss out on the 50% capital gains tax discount after 12 months.

Self Managed Superannuation Funds are a type of trust that are very usable in property investing, but I’ll go more into detail with them another time.
Trusts: A discretionary or family trust also trap losses in the trust not allowing you to claim negative gearing.
A unit trust I believe allows you to claim negative gearing but is not flexible in the way you can disperse income like a discretionary trust.

This brings us to the Hybrid Trust. But not just any Hybrid Trust, the trust that took me all these years to find and locate and one I actually purchased and am using is called strangely enough the Property Investors Trust. It is a Hybrid trust that allows you to claim your negative gearing and also disperse any profits to whom ever you like within your family, either by blood or marriage relations. The trust also does not expire in 70 years like many other trusts. This trust is built from the ground up for property investing.
In Australia there is one place that sells it as they set it up and copyrighted it. You can get yours from Chan and Naylor Accountants. The cost isn’t cheap ($1700), but over many years will save you thousands of dollars. To become a Chan and Naylor customer you must also first complete their financial health check assessment ($395) to see where you are and to create a plan for your future. I found that very worth while and exciting!

For better asset protection, you may find you are recommended to create a company to be trustee for your trust, this will add another $1085 to your bill, but may save you everything you own in the future.

After speaking with Chan and Naylor they may recommend something else for you, but the above is what I ended up with, and if your only doing property investing, you will probably end up with the same structure.

Remember, you need to set up your structure before you start acquiring property as it is expensive to move ownership of properties later. If you already have investment properties in your own names, don’t worry, just speak to the guys at Chan and Naylor.
I hope this has saved you several years of confusion. Head on over to Chan and Naylor’s website for more information.