Who’s name should the title of your new property be in?
What are the pro’s and con’s of each?
What if you change your mind or realise you made a mistake?
These questions are arguably the most important you will ask yourself and your advisors, when you are about to purchase a property. Making the wrong decision, or just an ill-informed decision could cost you thousands of dollars in missed tax benefits and/or capital gains tax concessions.
There are a number of options available to you, one of the reasons why this is such a big decision:
- Individual name(s)
- Family or Unit Trust(s)
- SMSF (via a SMSF Loan)
Owning property in individual names, either jointly or on your own, has its pro’s and con’s, just like any option in life. The thing to do is make sure you are well informed and can be confident you are making the best decision for YOU. Individual ownership is easier to administer, is less costly than other options and allows you to utilise the 50% CGT discount for assets owned for more than 12 months. Some of the disadvantages can be lack or flexibility and a greater need for planning at time of sale.
A company is not a recommended structure for the purchase of a long term investment, such as property, as they cannot access the capital gains tax discount. There can be difficulty accessing the income generated by a company.
Trusts can be beneficial for property ownership as they allow more flexibility and offer great asset protection (depending on the type of trust you set up). They are particularly useful where income is being generated as they allow discretion with how income is allocated to tax-payers. However, they are costly to set-up and administer, and are generally only beneficial in a few different circumstances. Be careful as trusts in Victoria and New South Wales may pay very high land tax surcharge depending on the type of trust.
There are a number of ways Self Managed Super Funds (SMSF) can be used to add to your property portfolio. Whether you have the funds to purchase a property outright or utilise the borrowing provisions available the concessional tax rates make this an attractive structure for some people. Go to Property & SMSF Loans page for more detailed information.