Best structure for trading

Our Experts Answer:

Trading trusts had been used as a tool to allow investors to structure their affairs and avoid being tainted by associated trading or development activities. In October last year the government changed the definition of an associated person and made it virtually impossible to structure your affairs and avoid being tainted by association to a development or building entity.

Since then structuring has perhaps reverted to conventional concerns like exposure to business risk, limiting tax rates payable on development profits and ensuring that wealth is protected. A convention structure would now involve a company doing the trading with the shares held by a trust. The company offers a 28% tax rate and limited liability protection.

The trust offers protection for the dividends flowing out of the company. The structure does not provide any assistance with avoiding tainting. This means property investments held by people associted with the company must be kept 10 years if income tax on any gain is to be avoided. 

Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.