Self managed super funds (SMSF) continue to remain popular and offer higher levels of control over your retirement planning. There are many rules applying to SMSFs. The following 10 golden rules are a great place to start.

What are the 10 golden rules?

1. Know whether your SMSF is an Australian super fund

For an SMSF to be considered as a complying super fund, the fund must satisfy three tests for it to be classified as an ‘Australian superannuation fund’. The fund must have:

• been established in Australia or the assets of the fund are located in Australia;

• satisfied the central control and management test; and

• satisfied the active member test.

It is important to satisfy this definition to ensure the fund is concessionally taxed at a maximum of 15 per cent on income (including capital gains at 10 per cent). If the fund fails this definition, then the fund’s taxable income will be taxed at 45 per cent.

2. Understand your trustee role, responsibilities and duties

Being a member of the fund also means you must be a trustee. All trustees are responsible for the running of the fund and the decisions affecting each fund member. Most importantly, the trustees need to comply with the superannuation and taxation laws to ensure the fund retains its complying status and is entitled to the superannuation tax concessions. The trustees of an SMSF also need to:

• act in the best interests of all fund members when making decisions;
• manage the fund (including the assets) separately from their own personal financial affairs; and
• ensure the money in the fund is only accessed where the law allows it.

3. It pays to invest professionally

One of the key areas of responsibility for trustees of an SMSF is investment management. Most importantly, a trustee of an SMSF is required to prepare and implement an investment strategy for the fund. An appropriate strategy will establish investment objectives and detail the investment methods the fund will adopt in order to achieve these objectives. It is essential to seek advice from a Chan & Naylor financial adviser to help ensure the trustees set, execute and review an appropriate investment strategy.

4. Keeping the sole purpose test in the fund

The sole purpose test for an SMSF aims at ensuring investments are maintained for the purpose of providing benefits to fund members upon their retirement. The trustees of an SMSF must comply with the test to maintain the taxation concessions available. An example of a possible contravention of the sole purpose test is where members of the fund and their family occupy a holiday home owned by the fund.

5. Keeping things separate is the best option

The trustees of an SMSF must ensure the assets of the fund are kept separate from their personal financial affairs. This means trustees must ensure the members’ benefits are not illegally accessed prior to retirement or in the event of their death by their beneficiaries.

6. Follow the rule books

An SMSF is a trust and the trust deed (i.e. the rule book) contains the governing and operating rules of the fund. An SMSF must adhere to other rule books such as superannuation and taxation laws which need to be consulted in conjunction with the trust deed. When setting up a fund, the deed should be constructed by a professional such as Chan & Naylor financial planning who specialises in SMSFs. Your deed will also need updating over time to reflect the changes in superannuation law.

7. Do not break any investment rules

The trustees of a fund must be aware of relevant restrictions that prevent SMSFs from making certain investments. Examples include borrowing in particular circumstances and lending money or providing financial assistance using fund resources to a member or a relative.

8. Know what retirement planning strategies you can use

An SMSF can allow you to use many different retirement planning strategies in order to reach your goals and objectives. It is essential to seek professional advice from a Chan & Naylor financial adviser to ensure you maximise your SMSF and retirement planning goals and objectives.

9. Decide whether you need to outsource

Trustees can engage SMSF professionals to complete mandatory obligations and tasks including taxation returns, administration, reporting and auditing. Some of these professionals can include an accountant, administrator or a financial adviser. Even though trustees can engage the services of professionals, they are bound to retain control over the fund and will have ultimate responsibility and accountability for the fund.

10. Satisfy the mandatory obligations

Having an SMSF can deliver many advantages to members of the fund. However, it is important that trustees ensure mandatory obligations are met. These can include taxation returns, record keeping, administration, reporting, auditing etc.

Need more information?

To obtain more information about SMSFs, contact Chan & Naylor Financial Planning on

1300 250 122 or visit us at www.Chan-Naylor.com.au

General advice warning:

This communication has been issued by Chan & Naylor Financial Planning (Corporate Authorised representative of PATRON Financial Advice (PFA), ABN 13 122 381 908, AFSL No. 307 372. This information is of a general nature only and is not intended to represent investment or professional advice. This information does not take into account your individual objectives, financial situation and needs. You should assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision.

Motor Vehicle Finance comes in many forms !

Commercial Hire Purchase, Chattel Mortgage, Finance Lease, Novated Lease, Personal (Consumer) Car Lease, are all forms of Motor Vehicle finance available to business owners today!

To the uninitiated, the selection of the right product can be both daunting, and, if not approached with a degree of care, costly, as the different Balance Sheet and Tax treatments can have a direct impact on a company’s cash flow.

Leasechoice has access to all of the major (and some “minor”) Motor Vehicle funders, offering all of the above products, ensuring that whatever your needs may be, or whatever the recommendation of your Advisors, the finance outcome will be appropriate.

For those businesses with medium to large Fleets of vehicles, Leasechoice can also facilitate Fleet Management services, taking the hassle of accounting, reconciling and reporting away from Management, allowing them to focus on their business, and making money !

With the cost of Motoring going up each year, an efficient Fleet Management solution can save a business thousands of dollars, which can then be redeployed into revenue generating activities within the business!

For information about Motor Vehicle Lease finance for business, or to discuss your potential Fleet Management requirements, please contact:

Michael Levin, Sales Director, Leasechoice at:

michaell@leasechoice.com.au

1. Should I have a will?

The answer is yes if you want to control who gets what and not leave it to the government or the courts.

People should also consider writing up an Enduring Power of Attorney which identifies someone to make decisions for them if they are incapacitated (i.e. still alive but maybe in a coma or mentally ill). A will is only activated after death. This type of document can also include what medical treatment you want and who will make these decisions.

2. What does my Will cover ?

Wills only pass on assets that are in your name i.e. your estate.

Your will also appoint who you want as executor/s who will then carry out your wishes.

Executors take on a legal responsibility so the nominated person can decline, maybe after your death, and so it is a good idea to have a fall back person/s.

The executor can only carry out what you say in your will and not what they think you wanted. It is therefore imperative that you carefully consider your wishes and have them properly documented.

If you have a financial binding agreement (pre nuptial) then you must note that on death your will takes precedence and without a will then the distribution of your estate will be as per government legislation.

3. Non Estate Assets

These are assets not in your name. These principally include your superannuation and Assets in a Trust.

For superannuation, normally a Binding Death Nomination (BDN) is made where you advise the trustee of the super fund and what you want done with your super assets.

Typically it directs the super assets to go to your estate and be handled

Via your will or to go to people/s direct. You can even keep the funds within

Super for someone else’s benefit. Without a BDN the superfund trustee has to authority to distribute as they please within limitations e.g. your estate or to dependents.

Care is needed as many BDNs can be easily overturned by the courts if someone objects that they did not get something or enough. Also note that divorce or marriage does not necessarily delete the operation of a BDN.

There are also tax implications depending on who Super money is distributed to on your death. In summary your spouse or financial dependents receive monies tax free but non tax dependents such as adult children may have to pay some tax on some of the distribution.

For assets in a trust you need to pass control over to someone.

Control comes from the position of an appointor of the trust and a

Memorandum of wishes should be prepared identifying who will become appointor on your death. If you have a company as trustee then the shares (estate assets) in that company will need to be distributed on your death. The new appointor can then decide to keep that company as trustee and if they are also the shareholder (your will passed the shares to them) they can then appoint themselves as directors. In this scenario legal title of assets held by the trust e.g. a property does not change and so it can be much easier managed on your death.

4. Type of will?

Typically people prepare a will and send assets to individuals. These new owners now own the assets. There is no CGT or stamp duty on transfer via a will.

These new owners now have assets in their name. If they get sued or divorced etc then they can lose the assets. Children who receive income or capital (and then sell) are heavily taxed i.e. 66.5%- 46.5%.

An alternate is a testamentary trust which identifies the assets and instead of going to the person, the assets go to a trust and the person you wanted to get the asset now is made appointor i.e. controller of the trust. They control not own. You could instruct the executor to set up a company as trustee with the shares owned by the person.

As the individual person does not own the asset but merely controls the assets issues of bankruptcy and divorce maybe sidelined. Children who receive income or capital from a testamentary trust are taxed at normal adult rates.

The testamentary trust is written but not signed and forms part of the will. Your executor signs the trust after your death. There is no CGT or stamp duty for assets going to testamentary trust on your death. You can have multiple testamentary trusts with different assets going to each and then different individuals controlling the separate trust or have it all combined.

5. Capital Gains Tax

The use of a testamentary trust can also be useful if you leave an asset e.g. a property to multiple people where some may want to “take the money and run”. In this case as the owner does not change i.e. the trust then as someone is bought out there would normally be no stamp duty on the change in control. CGT would still apply.

If the recipient of an asset sells then CGT is calculated differently depending on the original acquisition date of the asset. If the asset is a pre CGT asset then its cost base changes to its market value on date of death and if sold then it is now subject to CGT based on the increased cost. If the asset is a post CGT asset then cost base stays the same and if subsequently sold the Capital Gain is the same as if the original owner had sold. The tax paid in both circumstances is the marginal tax rate of the recipient.If a principle place of residence is passed on it can be sold within two years with no CGT impact.

Ken will be presenting at the Get Smart with Property Workshop follow this link for more details. http://www.chan-naylor.com.au/seminars/get-smart-with-property-workshop-ken-raiss/

Important notice and general advice warning:

This information is of a general nature only and is not intended to represent investment or professional advice. This information does not take into account your individual objectives, financial situation and needs. You should assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision. A Product Disclosure Statement (PDS) for the products mentioned in this communication should also be obtained and you should consider the PDS in deciding whether to acquire, or to continue to hold, any investment.

The information contained in this document is given in good faith and is believed to be correct at the time of publication, but no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors or omission (including responsibility to any person by reason of negligence) is accepted by Chan & Naylor Pty Ltd, its officers, employees, directors and agents.

There are over a dozen major Equipment Financiers in the Australian market, each with their own Lease products, and differing credit and asset criteria.

Unless you have direct access to each and every funder, choosing a suitable Lease product can be a daunting task!

In a “normal” market environment, companies can expect to be able to lease almost anything, from a telephone system, to a Golf cart. However, the post-GFC equipment finance market is anything but normal, and finding a home for what might appear to be a straight forward lease request might prove to be anything but simple!

Working through Leasechoice eliminates the need to become an “instant expert”, by providing access to the full suite of lease products, and funders, including its own unique offerings, thereby saving time and avoiding frustration, and allowing clients to concentrate on their businesses, and making money.

For further information, contact: Michael  Levin on (02) 9240-8253

If a commercial tenant defaults on their monthly rental obligations, the landlord is left with a shortfall in rental income required to service outgoings, most importantly including loan servicing.

Yes, the landlord may hold a bank guarantee or Commercial Lease Bond that covers an initial 3 months or so of rent and outgoings (although this amount could be depleted or exhausted by having to use the funds to ‘make good’ the premises), but what about the longer term?

What if the landlord can’t find a replacement tenant? What if the market conditions force the landlord to accept a replacement tenant at a lower monthly rent?

Rental Guarantee Bonds cover any shortfall in monthly rent:

• After exhaustion of the initial default surety i.e., bank guarantee or Commercial Lease Bond;
• Until a replacement tenant has been found;
• Any shortfall in the monthly rent under the new lease agreement and the previous lease agreement;

The indemnity period can be up to 24 months; however, the Rental Guarantee Bond will stop paying the shortfall at the expiry date of the defaulting commercial lease agreement, not the new commercial lease agreement.

Are additional expenses such as rates and insurance covered?

Yes, providing they are identified as payable under the Commercial Lease Agreement and declared in the application. Generally, whatever outgoings are payable by the tenant/lessee under the Commercial Lease Agreement are covered under the Rental Guarantee Bond.

Does the term of the lease matter?

Rental Guarantee Bonds can be issued for commercial leases of up to 5 years.

Do rental increases during the period change the amount of the Rental Guarantee Bond?

Typically, the Commercial Lease Agreement is subject to an annual indexed adjustment. The Rental Guarantee Bond is issued for the initial amount of rental and any covered outgoings. The bond amount will be indexed by the same annual indexed adjustment.

An example of how the Rental Guarantee Bond delivers?

• Commercial lease is for a period of 3 years (36 months) at $100,000 rent and outgoings per month. We’ll assume a 3% annual indexed adjustment.
• Under the commercial lease agreement the landlord holds a bank guarantee or Commercial Lease Bond for $300,000, being the equivalent of 3 months rent and outgoings.
• At month 18, into the 36 month commercial lease, the tenant defaults.
• The landlord claims under the bank guarantee or Commercial Lease Bond and receives the equivalent of 3 months rent.
• The landlord sets about to find a replacement tenant.
• At the end of the initial 3 months vacancy period, the landlord still hasn’t found a replacement tenant. The landlord can start to claim $103,000 per month (year 1 $100,000 + 3% annual indexed adjustment) under the Rental Guarantee Bond.
• 6 months later, the landlord secures a replacement tenant, however, current market conditions will only support a monthly rent of $85,000. The landlord can continue to claims the $21,090 monthly shortfall (being $100,000 + year 2 annual indexed adjustment = $106,090) for a further 12 months up to the end of the original lease period of 36 months.

Under the above example, the landlord would have claimed:

• After the initial 3 months funding under the bank guarantee or Commercial Lease Bond, 3 months x $103,000 = $309,000.
• At month 24, a replacement tenant, however a $21,090 per month shortfall. Original lease to expire at 36 months, so 12 x $21,090 = $253,080.
• If the landlord was forced to use all or part of the initial $100, 000 under the bank guarantee or Commercial Lease Bond to make good the premises, the Rental Guarantee Bond would have been triggered earlier, resulting in an additional amount up to $300,000.

What are the benefits?

For the landlord:

• Any monthly shortfalls, incurred during the indemnity period, are paid
• By having 100% monthly rental guaranteed, the landlord can fund committed outgoings, particularly loan repayments
• The landlord doesn’t have to make a judgment about the financial status of the tenant
• The guarantor (the insurer) becomes accountable to pursue the defaulting tenant or the party(ies) providing the guarantees
• The landlord is a better quality of risk to financiers as monthly finance obligations can be maintained, even when premises are untenanted
• The capital value of the premises increases as rental income is guaranteed

For the tenant:

• In the event of long term leases being assigned, personal guarantees often stay in place with the assignment, with potentially high exposure
• In the event of future shareholder or partner changes, avoids any difficulties in obtaining releases from long term guarantees from the landlord
• Enables the tenant to rent a property from a landlord that might otherwise refuse to rent the property without a personal guarantee

How much do Rental Guarantee Bonds cost?

It depends upon the financial status of the tenant; indemnity period; term of the lease; and the bond amount. This cost is a once only payment upfront that covers the period of the lease.

Who pays for the Rental Guarantee Bond?

This is negotiated between the parties. Typically the landlord will incorporate in the monthly rent or outgoings amount.

What should a landlord do in the event of a payment default by the tenant?

The landlord must notify of a potential claim within 2 months of the first unpaid monthly rental. This is an important requirement, so that we can maximise any recovery possibilities against the defaulting tenant. Claims must be made within 4 months of the first monthly rental payment default, otherwise the claim may be declined. Once a default has occurred, the landlord must consult us before taking action against the tenant.

It’s important to ensure that any rights of recovery against the tenant are maintained.

Can the same Rental Guarantee Bond be applied to a replacement tenant?

No, a new Rental Guarantee Bond needs to be issued in respect of any replacement tenant.

Are Insurance Bonds widely accepted in the market place?

Insurance Bonds have largely been applied to the corporate sector. Several more insurers have entered the market more recently, with a focus on the small-medium sized business sector. The insurers are credit rated with excellent track records in the insurance bond markets.

It’s largely an awareness and education process, however, ultimately it’s at the beneficiary’s discretion whether or not to accept an Insurance Bond.

Investing for children is not always child’s play, but is can be made easier if you consider the following seven important factors and seek advice from a licensed financial adviser.

Investing for children: seven important things to consider
1) Why is it important to understand the goal?

Starting with the end in mind is important. Many people make investments on behalf of their children without defining exactly what they are attempting to achieve. When setting goals, they need to be clear and easy to understand so that they can be achieved. In simple terms, if you are saving for your children’s tertiary education, it is important to have an idea of how much a university degree may cost. From there, you can determine how much you need to save on a regular basis, what investments are appropriate and your investment time horizon.

2) What is the taxation treatment?

When it comes to investing for children under 18, the tax applied to investment earnings over $1,308 is 45 per cent. This does not leave much opportunity to accumulate assets in a child’s name before paying tax at 45 per cent. However, children can receive investment income up to $3,000 before paying tax when taking the low income earner tax offset[1] into consideration.

Consideration can be given to investing into assets such as Australian shares that pay tax-effective dividends (including imputation credits) or insurance bonds which are taxed at 30 per cent on investment earnings. Speaking to a licensed financial adviser about the different taxation treatment of investments, and the long-term impact to the investment portfolio to assist you with achieving your goals, should be considered.

3) Why is an investment strategy important?

An integral part of you achieving your goal will be investing into effective asset classes such as fixed interest, property and Australian and international shares. Having an investment strategy which combines the different asset classes and takes into consideration your tolerance to risk is essential.

A cash or fixed interest investment strategy could mean your goal may not be achieved due to lower risk and investment returns in comparison to Australian shares. An Australian shares investment strategy on the other hand could mean greater risk but potentially higher returns. It is important to bear in mind that the share market could produce a negative return.

4) What factors impact an investment strategy?

An integral part of your investment strategy is taking into consideration your appetite to risk and investment time horizon. The longer your investment horizon, the longer you have to achieve your intended goal which can reduce the level of risk involved.

5) Why is it important to understand investment risk?

It is essential to understand potential investment risks and be comfortable with the impact of decisions you make (ie how much risk you are taking on as a result of your investment decisions and time horizon). A simple way to gauge your risk appetite is to weigh up whether you could sleep at night knowing your investments are either gaining or losing money.

6) What are the types of investments available?

The following table summarises the available options when investing on behalf of children.

7) The power of regular investing

Making your money work harder for you is good practice and the easiest way to do it is to harness the power of regular investing. Investing regularly over a long period of time allows you to take advantage of compounding investment returns.

How can a financial adviser help?

A licensed financial adviser can help you navigate through the above seven important things to consider when investing on behalf of your children. A financial adviser can also assist you with your wealth accumulation strategy by:

• dealing with reduced income;
• maximising government benefits (ie Family Tax Benefits);
• obtaining appropriate insurance;
• establishing estate plans; and
• kick-starting your retirement planning.

Seeking advice from a financial adviser will ensure you work towards achieving your goals whilst having your own financial coach. Choosing a financial adviser is a very personal choice and you must feel comfortable with the adviser you choose.

Need more information

To unlock more information about investing for children, contact Chan & Naylor Financial Planning

http://www.chan-naylor.com.au/financial-planning/

Important notice and general advice warning:

This communication has been issued by Chan & Naylor Financial Planning which is a corporate authorised representative of PATRON Financial Advice, AFSL No.307379.  This information is of a general nature only and is not intended to represent investment or professional advice. This information does not take into account your individual objectives, financial situation and needs. You should assess whether the information is appropriate for you and consider talking to a financial adviser before making an investment decision. A Product Disclosure Statement (PDS) for the products mentioned in this communication should also be obtained and you should consider the PDS in deciding whether to acquire, or to continue to hold, any investment.

The information contained in this document is given in good faith and is believed to be correct at the time of publication, but no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors or omission (including responsibility to any person by reason of negligence) is accepted by Chan & Naylor Financial Planning, its officers, employees, directors and agents.

Office Equipment,  Computers/Servers, Software, Copiers, PABX’s/Telephones, Audio Visual Systems, Office Furniture,  Electronic Whiteboards, Security Systems, Compressors, Generators, Commercial Cleaning Equipment, POS Systems, Water Filtration Systems,  and more!

And much of it with no need for Financials*

BY its very nature, much of the above equipment depreciates quickly, and often needs replacing well within the term of the original lease. An Operating Lease provides flexible upgrade options, ensuring that your business is not left with redundant or inefficient equipment, which might hinder your productive capacity or profitability.

As an off-balance sheet item, an Operating Lease provides a business with access to and utilisation of necessary equipment without any of the disadvantages of physical ownership, and with all payments 100% tax deductible **

Equipment values as low as $2000 and up to $35000 can often be financed without the necessity to provide full financial information, whilst amounts in excess of this will normally be assessed based on debt service capacity.

For information on any aspect of the above, please contact Leasechoice on 1800 220225.

*Subject to criteria

**Based on current Tax Guidelines

Companies whose success depends on turning over stock, and making a healthy profit margin in doing so, often have significant capital tied up in non-productive, depreciating assets. How much better off would they be by Renting the manufacturing equipment, office technology, or retail point of sale systems, and then investing their available funds in more raw materials, or stock for their shelves? How many more times could they turn over their stock, making the same GP each time, whilst avoiding the Balance Sheet debilitating effect of Depreciation!

Many businesses still make the mistake of thinking that “ownership” of an asset is necessary to enable their business to maximise its utility. Nothing could be further from the truth, as often the most productive and useful assets are those which are regularly replaced and upgraded, to ensure that they are performing at peak efficiency. A large quantum of these assets are employed within a business under an operating lease /rental facility, ensuring maximum tax effect, and maximum flexibility.

In the Service Industries, whilst capital equipment is rarely a feature, the ability to “rent” the IT, furniture, and telephone systems, may well enable the business to deploy the freed-up capital to employ more support staff, enabling the Professional staff to concentrate on fee generating activities. This theme can be replicated in virtually all types of Industry or endeavours, bringing us back to the point, that Leasing can be one of the Smartest decisions a business can make !

The surety amount is usually the equivalent of 3+ month’s rent and outgoings. In the past, the surety was typically in the form of cash for smaller amounts or a bank guarantee for larger amounts. The problem is that both tie up working capital.

Not dissimilar to a Deposit Bond, Commercial Lease Bonds replace the need to provide cash or bank guarantees. Commercial Lease Bonds are issued on an unsecured basis. In addition, Commercial Lease Bonds are treated as being off balance sheet, so a company’s financials are enhanced.

By way of an example, a landlord seeks a $50,000 surety (representing 3 month’s rent and outgoings) for a 3 year lease term. The Bond Fee, payable in full upfront, is approx. $4,700 and is tax deductible.

The benefits for the tenant include freed up working capital; bonds are off balance sheet; one fee paid for the whole 3 years upfront; and no revisiting of paperwork during the lease period.

For the landlord, the bond is as good as a cash surety; can be called if a default occurs during the period of the lease or, following expiry of the lease, the tenant fails to make good the premises; and importantly, bonds are not subject to the jurisdiction of bankruptcy courts, i.e., if a default occurs, the proceeds from a Commercial Lease Bond can’t be clawed back by the receivers, as is the case with a bank guarantee.

In terms of landlord acceptance, as with Deposit Bonds requiring a ‘mind shift’ when first introduced, the same applies to Commercial Lease Bonds. More and more parties involved in commercial leasing are becoming aware of or more comfortable with the concept of Commercial Lease Bonds. More and more commercial lease contract documents are stating that insurance bonds are an acceptable form of surety. It’s largely an awareness and education process, however, ultimately it’s at the Landlord’s discretion whether or not to accept a Commercial Lease Bond.

With an estimated 300,000+ commercial leases being entered into each year, there’s rich pickings and good income to be made.

Any sale of part of your land is subject to CGT even though the property is your home.  If you sold the whole lot as a single parcel then there is no CGT because its a sale of your home which is exempt from CGT.

So, if you built 3 Units and sold 2 then the 2 sold will be subject to CGT. The remaining one can remain as your home and hence exempt from CGT when sold.

However, a better way to do it is to knock the house down first and sell the total parcel of land which is then free of CGT because it’s a sale of your home.

It’s best to knock the house down before selling because it reduces the stamp duty. You can sell the land to a partnership between a Trust as tenant in common with yourself where the Trust owns 2/3 and you own 1/3. In some States the transfer of land such as this has no stamp duty.

The reason for this is to gain exemption from CGT when the home/land is sold as one parcel to the partnership as it’s deemed a sale of your home and hence it’s free of CGT.

As a development site it can be sold for a greater value than as a single home especially if approval has been granted for the development of 3 units.

This increases the cost base to the partnership, so upon sale of the 2 units by the Trust it reduces the profit and hence the CGT.

One must also prepare a “partitioning agreement” to avoid double stamp duty and capital gains tax when the 3 units are sub divided into 3 titles.

This way the 2 units can be sold with lower CGT due to a higher cost base allocated to the land value of the two units and the third unit can still be sold later without CGT because they would retain it as their principle place of residence.

It’s also advisable not to use a Discretionary Trust. A “Property Investors Trust” is more appropriate in case you decide to retain one of the units or both units as an investment properties.

A Property Investors Trust would allow you to claim the negative gearing against your wages whereas a Discretionary Trust would trap the losses in the Discretionary Trust thus losing the benefits of the negative gearing.

However it’s best to see one of our Consultants to work out the actual numbers for you to ensure that it’s viable.

Also they will help determine a primary commercial reason to do this otherwise the ATO could apply Part 4A and deny the deduction if the primary reason was done to avoid tax.

Ed Chan

Director/Founding Partner Chan & Naylor

www.chan-naylor.com.au