Choosing to invest in property is a big decision and there are many things to consider in addition to finding the right piece of real estate, including the investment structure.
At OneCorp, we want to help you be confident regarding every area of investing in a property before you sign the dotted line. One of the biggest mistakes that first-time investors make is neglecting to define their ownership structure.
There are many different ownership options. Below are the three most common. You’ll want to carefully consider all options to find an ownership structure that’s right for you.
Individual structure for property investment
An individual is a separate legal entity at law. Owning an investment property under your own name is the simplest and cheapest option available in Australia. When you decide to be the sole owner, financing is based upon your income, so in most cases, all you will need are payslips and tax returns for proof of income. One of the benefits of this option is that you’ll be eligible for the capital gains tax exemption. One of the drawbacks to this structure is that it does not offer any asset protection in the event that you are sued, which in some instances may need consideration.
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Company structure for property investment
The company structure is often the favorite choice for full-time property investors or property developers. A company is a separate legal entity at law. Generally speaking, this means that, if the individual gets sued, the property will not be at risk because it is legally owned by the company, not the individual. The rental income derived by the company will be taxed at the corporate tax rate as long as it is below $50 million, which is substantially lower than the individual tax rate.Â
While you do get increased asset protection when you choose the company structure of property investment, you are not eligible for the capital gains tax discount. This company structure might be good for you if you are looking to keep your properties for the long haul. If you are looking to buy and sell relevantly quickly, this might not be the best option for you.Â
Trust structure for property investment
Trusts are a popular option as an ownership structure. A trust is not a separate legal entity at law. A trust is a relationship where a person (the trustee) is under an obligation to hold a property for the benefit of other persons (the beneficiaries). The trust deed defines the relationship between the trustee and the beneficiaries. The two most common types of trusts for property investment are a family trust and a unit trust. A unit trust gives you a defined interest, so your profit from the property will be the same as your ownership within the trust. Family trusts are more complex as in some ways they offer flexibility and asset protection; however, depending on the structure of the trust, it may impact how much you are able to finance.ÂWe Can Help
Not sure which ownership structure will give you the best benefits on your next property investment? We can help! At OneCorp, we walk you through every step of the process at NO cost to you. We create a personalized property strategy and help you find the best opportunities on the market, so you know you’re getting the best return. Getting started on your investment property journey has never been easier:- We start by helping you set clear goals and objectives as to what you want to achieve through property investment.
- From there, we run the numbers through proprietary software to accurately assess exactly what you need out of a property portfolio to achieve those goals.
- Lastly, we find the perfect property to make those objectives a reality!
