Should I start a Trust or LAQC?

Question from matt updated on 19th February 2009:

I currently have a rental property in an LAQC it is negatively geared. I want to buy more investment properties that will ideally be cash flow neutral/positive. Is it best for me to start a form of trust, as the properties wont be making a loss? I'm 20 and plan to own many properties long term. thanks

Our expert responded:

Well done in planning for your future at your age. The thing to remember with an LAQC is that you need to have a personal income in order to offset the loss against. If you don't have an income, or your income is too low, such that the loss from the LAQC can't be used up in that year, then that loss is carried forward to be offset against future income. In this case, whether the properties are owned by an LAQC or a trust makes no difference to your tax position. When building up a large property portfolio, I certainly wouldn't be putting all of your properties into an LAQC. An LAQC does not offer fool proof asset protection on a personal basis because in order to use the LAQC's loss, you have to first own shares in the LAQC. It may work to have some properties in the LAQC and have the rest of them in a trust. A trust suits property ownership on a long term basis far better than an LAQC does.

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.




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