Transcript: hello everyone my name
a corporate commercial attorney we
specialize in structures and tax and
property and I'm going to talking to you
guys about a couple of queries that are
frequently asked by property investors
or persons acquiring residential
properties for themselves first issue
we're going to tackle today is what
options do I have when I'm looking to
acquire property Drybar that into my own
name do I put it in a closed corporation
if you can still get one you can't get
them anymore
Pui limited or do I have a trust as an
option which is often a mythical entity
of your second debate today so really
it's a question of what are your
short-term your medium-term your
long-term objectives are you buying to
hold the property for your personal use
is that a holiday home is it a
commercial property or you and investor
so we could elaborate and spend quite a
lot of time the different options but
essentially two main points that one
needs to think about and if this is a
property for you personally what risk
are you exposed to as far as we
concerned any person who faces any risk
should ideally be looking to have this
property in an entity other than in your
own name clearly if you have a good sued
or you're in business you have exposure
buying a property's a major purchase
it's a large acquisition lots of costs
involved so if you own the wrong
structure not really easy to move the
property into the appropriate structure
if you made the wrong choice so colorada
if at all time thinking was going to
assessing which is the best option for
you so option one is default most people
buy property into their own name right
very simple it's in your name problem is
if you run into trouble you could lose
your home that's not ideal at some point
we will die don't know anyone who's
immortal so yep you're eventually going
to snuff it and on your demise you're
going to have some serious issues to
deal with property is caught up in your
frozen estate your spouse or dependents
other person's children don't have
access to this asset until such time as
your estate is wound up there could take
anything from about eight nine months to
one two three four five years so you're
going to be creating serious hardship
for whoever's
going to be needing to access their
property or the rentals or whatever the
cases pretty expensive exercise to die
so try and avoid it at all costs but
your death will cost you capital gains
tax the maximum rates at this point is
thirteen point six percent so it's a
fairly huge chunk that is going to be
coming out of any growth of the property
so you want to spare that in mind if the
properties in your name on your demise
on top of that you on your estate like
you you will be subjected to executive
fees also the maximum legislated rate of
300 percent less VOT just under four
percent again a massive chunk and the
kicker here is for you to consider that
this is a charge on the gross value not
on the net value quick example property
is worth five million you have a
mortgage of four million your net is 1
million your executor is taking porpoise
into the five million not the 1 million
so suddenly it's a massive cost on a
small percentage as seems pretty
harmless then of course you are
subjected to state duty at a rate of 20
percent on any assets in excess of the
300 million so pretty steep so if you're
buying a property in your own name just
know that you have no asset protection
is subjected to potentially massive
costs on the DeMars and again if you are
renting your property are not very tax
efficient if you are in the top tax
bracket because that rental income will
be added to your income further causing
new tax sort of issues or more tax to
pay other options or close corporation
if you can still get your hands on one
or you have one or Pty Limited a lot of
people do consider this as an option
because it is a known type of entity and
sauce pretty much has settled the
taxation around this so there's some
level of comfort problem with us is a
closed corporation or company it's not
the ideal residential property owning
entity because you will eventually pay
too much tax as well compared to a trust
which we're going to talk about in a
minute so PT y CC your tax rate is 28%
to get the cash out of a company P or
the CCA we're paying a fee the dividends
taxed bringing you effectively to a tax
rate of thirty eight point eight percent
also default positions you can have
a trust owning a company that in turn
owns your property you are
multiplicative extra costs which you can
possibly avoid by a more simplified
structure not a great structure a CC or
PTY if you ever selling a property
because you can end up with a huge
capital gains tax problem in the company
of the CC at an effective rate of 18.6%
to get your hands on the profits after
tax cost you fear the dividends tax of
15% bringing your total tax ball to just
..
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