For those working for themselves what are you operating as?
Was going to work from home/for myself while I'm studying the next couple of years and trying to work out the best way to (officially) do it
Family Trust.
Cost about a grand to set up
Company is ideal. Company as it means your personal belongings are liable if you ever went broke / got sued. The trust is there to distribute the income to whomever you please.
The ASIC website actually has good information on this.
Yep company is in my name, house is in my wifeās name, just in case for worst case scenario.
As it turned out, business is thriving, so no real need for the above set up, just my accountantās way of being prudent in the early days - he would see a lot of new businesses come & go by the wayside.
Better scenario is Family Trust Company in your and wifeās name that owns all your assets, and you rent your family home from the trust, so it can be negatively geared. The only Trust income is rent and you do no other trading.
You have a separate Pty Ltd for your business that is owned again by you and the wife, but it has no assets. You actually work for the Family Trust who contracts you to manage the other Company. So all income can be split amongst family to minimize tax.
There are still rules and liability around being a Director but find relatives you donāt like and make them Directors with one share.
My Accountant also manages footballers.
You would need to have enough āparticipantsā that are not earning money. And then pay them <19k tax-free threshold.
Personally, I donāt have anyone that fits this description.
Even if it is just you and your wife to just you, it is the same as being paid direct from your trading company, except you can be much more flexible in distribution.
For those working for themselves what are you operating as?
Was going to work from home/for myself while I'm studying the next couple of years and trying to work out the best way to (officially) do it
Family Trust.
Cost about a grand to set up
Company is ideal. Company as it means your personal belongings are liable if you ever went broke / got sued. The trust is there to distribute the income to whomever you please.
The ASIC website actually has good information on this.
Yep company is in my name, house is in my wifeās name, just in case for worst case scenario.
As it turned out, business is thriving, so no real need for the above set up, just my accountantās way of being prudent in the early days - he would see a lot of new businesses come & go by the wayside.
Better scenario is Family Trust Company in your and wifeās name that owns all your assets, and you rent your family home from the trust, so it can be negatively geared. The only Trust income is rent and you do no other trading.
You have a separate Pty Ltd for your business that is owned again by you and the wife, but it has no assets. You actually work for the Family Trust who contracts you to manage the other Company. So all income can be split amongst family to minimize tax.
There are still rules and liability around being a Director but find relatives you donāt like and make them Directors with one share.
My Accountant also manages footballers.
You would need to have enough āparticipantsā that are not earning money. And then pay them <19k tax-free threshold.
Personally, I donāt have anyone that fits this description.
Even if it is just you and your wife to just you, it is the same as being paid direct from your trading company, except you can be much more flexible in distribution.
Iām no accountant - but the sole benefit of diverting income is to get a lower tax rate. Tax-free is around 19K. Goes all the way up to ~%50%. You can distribute to those with no income and get tax-free income. But you need to have those participants. You can distribute to those on lesser tax brackets - but then you stand to raise their tax brackets. You can play merry-go-rounds and juggling acts, but in the end, it becomes more cumbersome than itās worth in my opinion. If you want to pay less tax, legally - you have two options. Earn less. Or spend more. And then thereās the 3rd option - be a multi-corp.
For those working for themselves what are you operating as?
Was going to work from home/for myself while I'm studying the next couple of years and trying to work out the best way to (officially) do it
Family Trust.
Cost about a grand to set up
Company is ideal. Company as it means your personal belongings are liable if you ever went broke / got sued. The trust is there to distribute the income to whomever you please.
The ASIC website actually has good information on this.
Yep company is in my name, house is in my wifeās name, just in case for worst case scenario.
As it turned out, business is thriving, so no real need for the above set up, just my accountantās way of being prudent in the early days - he would see a lot of new businesses come & go by the wayside.
Better scenario is Family Trust Company in your and wifeās name that owns all your assets, and you rent your family home from the trust, so it can be negatively geared. The only Trust income is rent and you do no other trading.
You have a separate Pty Ltd for your business that is owned again by you and the wife, but it has no assets. You actually work for the Family Trust who contracts you to manage the other Company. So all income can be split amongst family to minimize tax.
There are still rules and liability around being a Director but find relatives you donāt like and make them Directors with one share.
My Accountant also manages footballers.
Do you get stung for capital gains if you sell the house? I always thought the benefits of negatively gearing would be offset by the big tax bill at the end. Maybe i just need a better accountant.
For those working for themselves what are you operating as?
Was going to work from home/for myself while I'm studying the next couple of years and trying to work out the best way to (officially) do it
Family Trust.
Cost about a grand to set up
Company is ideal. Company as it means your personal belongings are liable if you ever went broke / got sued. The trust is there to distribute the income to whomever you please.
The ASIC website actually has good information on this.
Yep company is in my name, house is in my wifeās name, just in case for worst case scenario.
As it turned out, business is thriving, so no real need for the above set up, just my accountantās way of being prudent in the early days - he would see a lot of new businesses come & go by the wayside.
If you are a director of a company, your personal assets are accessible through litigation, including āa house you have in your wifeās nameā. This is something that changed a while ago.
For those working for themselves what are you operating as?
Was going to work from home/for myself while I'm studying the next couple of years and trying to work out the best way to (officially) do it
Family Trust.
Cost about a grand to set up
Company is ideal. Company as it means your personal belongings are liable if you ever went broke / got sued. The trust is there to distribute the income to whomever you please.
The ASIC website actually has good information on this.
Yep company is in my name, house is in my wifeās name, just in case for worst case scenario.
As it turned out, business is thriving, so no real need for the above set up, just my accountantās way of being prudent in the early days - he would see a lot of new businesses come & go by the wayside.
Better scenario is Family Trust Company in your and wifeās name that owns all your assets, and you rent your family home from the trust, so it can be negatively geared. The only Trust income is rent and you do no other trading.
You have a separate Pty Ltd for your business that is owned again by you and the wife, but it has no assets. You actually work for the Family Trust who contracts you to manage the other Company. So all income can be split amongst family to minimize tax.
There are still rules and liability around being a Director but find relatives you donāt like and make them Directors with one share.
My Accountant also manages footballers.
Do you get stung for capital gains if you sell the house? I always thought the benefits of negatively gearing would be offset by the big tax bill at the end. Maybe i just need a better accountant.
Yep, but currently CGT is a sham. It is discounted 50%, and only levied on any gain above the inflation rate. If it was a real capital gains tax like I think they have in the USA you may review who holds the title.
Then you need an investment property. My Accountant now always recommends block of apartments in Western Suburbs. When we started with him he was advising blocks of apartments in Thornbury, Preston and other then low cost areas. His argument is that low cost means lower rentals but higher percent returns, and upkeep lower as well. And if we had taken his advice and purchased in Thornbury, the capital gain is now massive as well. He is a good advisor, and you canāt have him !
His advice, by the way, has made two former Collingwood players massively wealthy, as they own well over 200 apartments now, and have staff managing their properties.
Then you need an investment property. My Accountant now always recommends block of apartments in Western Suburbs. When we started with him he was advising blocks of apartments in Thornbury, Preston and other then low cost areas. His argument is that low cost means lower rentals but higher percent returns, and upkeep lower as well. And if we had taken his advice and purchased in Thornbury, the capital gain is now massive as well. He is a good advisor, and you canāt have him !
His advice, by the way, has made two former Collingwood players massively wealthy, as they own well over 200 apartments now, and have staff managing their properties.
It's been a winning strategy for the past 20 years, but anyone who thinks the next 10-20 years of Australian residential property returns will even loosely resemble the returns of the past 10-20 years, lacks a very basic understanding of what drives residential property returns.
I bought my first property in 1974 and those expert economists were saying exactly what you are saying now.
Just tell me then, in words that us without any ābasic understandingā can understand what is going to change.
There is little sign that interest rates will go up in the next period, house prices have not fallen and still are rising, rents are booming and finding a rental property is difficult. If Labor wins the next election then there may be a change in negative gearing, but it will only be on new purchases and be limited in home values.
I bought my first property in 1974 and those expert economists were saying exactly what you are saying now.
Just tell me then, in words that us without any ābasic understandingā can understand what is going to change.
There is little sign that interest rates will go up in the next period, house prices have not fallen and still are rising, rents are booming and finding a rental property is difficult. If Labor wins the next election then there may be a change in negative gearing, but it will only be on new purchases and be limited in home values.
Over the last 20 years, mortgage rates have come down from almost 20% to 5%. This fall in rates has led to a steady tendency for households to take on more debt to buy these houses, and this is reflected in the growth in Australia's mortgage debt-to-GDP ratio from ~20% to ~100% today, which is among the top few in the world depending on how the data is sliced.
What this has led to in the housing market, is a steady fall in yields (income/capital value), from ~10% to ~3% (net) today - this fall in yields has been the principal driver of the bonanza-type returns for residential RE investors over the last 20 years. For real estate values to continue rising faster than rents (i.e. for the environment of the past 20 years to repeat), that yield number has to come down even further, which seems to me rather unlikely given interest rates are already at historical lows and household debt at historical highs.
Iām not necessarily saying thereās an apocalyptic bust around the corner with residential RE, but i personally think one would have to be extremely brave to expect long-term, pre-debt returns of greater than about 6% p.a. at todayās prices. I see a 6% p.a. long-term return, on todayās prices, as somewhat brave because even that assumes rental growth at inflation (~3% p.a.) plus no change in yields from their all-time low point of today, at 3%.
Quite aside from the topic of speculating on the future direction of interest rates and implied RE yields, i think itās going to be very interesting to see what happens to apartment rents in the east coast cities over the next 2-3 years, in the midst of the biggest wave of supply to ever hit the market. I certainly donāt see ārents boomingā as you do.
Re-read my posts. My Accountantās advice has always been to buy low cost investments that will always give a better yield as there is always a shortage and rents in terms of yields are higher.
We didnāt take his advice and bought a rental property in Toorak, currently give a return of about 3%. If we had done as he suggested, we could have purchased three properties locally which have yields of nearly 7%.
And over the period of the last six years, the Toorak property has probably increased in market value by 20% while the local figures are more like 30%.
I do agree with caution, but this Accountants strategy is sound with a lot less risk.
What do experts think of the impact on real estate prices of Chinaās restriction on capital outflow (ie Chinese people can no longer take their RMB out of the country to buy overseas property)?
Re-read my posts. My Accountant's advice has always been to buy low cost investments that will always give a better yield as there is always a shortage and rents in terms of yields are higher.
We didnāt take his advice and bought a rental property in Toorak, currently give a return of about 3%. If we had done as he suggested, we could have purchased three properties locally which have yields of nearly 7%.
And over the period of the last six years, the Toorak property has probably increased in market value by 20% while the local figures are more like 30%.
I do agree with caution, but this Accountants strategy is sound with a lot less risk.
Speaking very generally, a higher initial yield will provide less rental growth in the long-term - Chadstone shopping center is a 4% yield asset whereas a local strip mall might be more like 7-8% because the implicit expectation is that Chadstone will grow its rents faster than a suburban strip mall, 101 Collins is a 4.5% yield but a suburban office block might be more like 7% because 101 Collins is expected to grow its rents faster etc. The same general theory applies in residential property. What you tend to see in all speculative booms across all income-producing assets, such as the one we are in now in residential real estate, is that yields compress across the quality spectrum, but compress particularly hard in the higher yield segments as discernment between asset quality falls by the wayside during the boom, but then when the tide goes out, the yield spreads get reasserted, which is a technical way of saying that the lower quality assets get crunched relative to the higher quality assets. This is common across stocks, bonds, real estate and so on.
Iām glad to hear youāve had good results from your strategy thus far, but i personally donāt believe thereās such a thing as a āfree lunchā in the sense of high-yielding assets being less volatile or risky - the immutable law of finance, which i subscribe to, is that higher risk comes with higher expected returns.
What do experts think of the impact on real estate prices of China's restriction on capital outflow (ie Chinese people can no longer take their RMB out of the country to buy overseas property)?
Read Michael Pettis if you want an expert's opinion on the Chinese economy - he can be technical and a little turgid, but is the best i've ever read in that particular field.
Today is day 593 since I last workedā¦tomorrow, I start a new job.
The time between jobs was intentional as I was made redundant from my last job, had no debt and a reasonable amount of money in the bank.
During that time, Iāve traveled both domestically and internationally ticking off many things from my travel bucket listā¦and Iāve spent a lot of time doing sweet fark all (watching movies, reading books, listening to music etc).
Iām going back into the industry that i know and there are a few reasons for thatā¦one is that I knew people who I could call upon when I decided to go back to work (and that got me the job) and the other is that it pays me a better wage than I would probably get elsewhere.
Iām not looking for the perfect jobā¦I never haveā¦Iāve always viewed work as a means to an end and if/when I have a bad day at work, i just think of the money that will be going into my bank account to help pay for my next trip.
The one thing that I really reinforced for myself during my time off is itās important to remember to live in the momentā¦sure, I want a reasonably comfortable retirement but I know that not everyone gets to that point.
So know whatās important to youā¦and then organise your life to allow that to happen.
When I have gone into work, thinking what is the hit going to be today from some sociopath senior to me, when I come after the hits, lovely modest house and people /pets that need me, some of them even love me, I get my balance back and remember that I love some of the content of my work. And, whatās even better is the upwards assessment component of performance assessment at my work. Sometimes it is quite effective and the sociopath gets sent to charm school or is forced to apologise - once to the whole staff under them.
Started off as a medical scientist after completing my med lab science degree. Did that for seven years then moved into making diagnostic blood transfusion reagents for seven years. Quit that job without anything else lined up, hoping like hell I could break out of a rut that I was in and it could pressure me to search for another job probs outside science related industry. For five months I searched for another job and it was sheer luck that I got my current position of working night shift in a pharmaceutical factory as the person they were going to hire dislocated his shoulder and they needed someone straight away.
As my savings dwindled, my five months unemployed was really telling as it really reinforced my poor job prospects if I do ever lose my job while and the need to look for another income source outside my job. Been ā ā ā ā at all my jobs - donāt know how employers have put up with me for so long and promoted me ffs.
Today is day 593 since I last worked...tomorrow, I start a new job.
The time between jobs was intentional as I was made redundant from my last job, had no debt and a reasonable amount of money in the bank.
During that time, Iāve traveled both domestically and internationally ticking off many things from my travel bucket listā¦and Iāve spent a lot of time doing sweet fark all (watching movies, reading books, listening to music etc).
Iām going back into the industry that i know and there are a few reasons for thatā¦one is that I knew people who I could call upon when I decided to go back to work (and that got me the job) and the other is that it pays me a better wage than I would probably get elsewhere.
Iām not looking for the perfect jobā¦I never haveā¦Iāve always viewed work as a means to an end and if/when I have a bad day at work, i just think of the money that will be going into my bank account to help pay for my next trip.
The one thing that I really reinforced for myself during my time off is itās important to remember to live in the momentā¦sure, I want a reasonably comfortable retirement but I know that not everyone gets to that point.
So know whatās important to youā¦and then organise your life to allow that to happen.
Started off as a medical scientist after completing my med lab science degree. Did that for seven years then moved into making diagnostic blood transfusion reagents for seven years. Quit that job without anything else lined up, hoping like hell I could break out of a rut that I was in and it could pressure me to search for another job probs outside science related industry. For five months I searched for another job and it was sheer luck that I got my current position of working night shift in a pharmaceutical factory as the person they were going to hire dislocated his shoulder and they needed someone straight away.
As my savings dwindled, my five months unemployed was really telling as it really reinforced my poor job prospects if I do ever lose my job while and the need to look for another income source outside my job. Been ā ā ā ā at all my jobs - donāt know how employers have put up with me for so long and promoted me ffs.
