Is a trust or a LAQC better for family property investments?

Our Experts Answer:

There's quite a lot of questions in there which would need a couple of hours to go through fully. We haven't got a couple of hours, so here goes.

The first thing you need to do is go through and consider your long term goals and objectives. Done properly, this will give you the answers to many of your questions and more such as how ownership of the properties should be structured and what will be the primary driver, tax benefits or asset protection. A five year strategy will also help answer the question as to what the level of borrowings should be overall.

It will also be important to consider your own risk profiles - if you can't sleep at night because you're worrying about the level of debt, then perhaps maximising borrowings to the limit won't bode well for you. The second thing to consider is the building of the new houses and minor dwelling. Under the Income Tax Act, building a new house comes under the definition of major works, which means that the proceeds of any sale from building will be taxable.

However, there is an exemption that would work for you and that is when building is undertaken for the purpose of renting the property out. Under this exemption, there will be no tax payable should you have to sell for some reason in the future. It would also be advisable to hold onto the property for ten years. One of the great things though about building the new houses will be the depreciation - your depreciation will be higher merely because the building will be brand new and a chattel valuation will help you to maximise this.

Kenina Court is a director of Acorn Solutions Limited, an accounting firm dedicated to working with clients to help them create wealth. She is an avid property investor, entrepreneur and seminar presenter on asset protection and wealth strategies.