Should I buy "My Property" in "My Name"?

When a decision is made to buy a property, the buyer must think through carefully what his end goal will be and what he intends doing with the property. By This he can establish which entity to register.

In all fairness, the thought that comes to mind when acquiring a property is focused on"what to buy",  "where to buy it",  and "how much it will cost". By so doing it’s easy to ignore the ‘who’, that is, the name that will appear on the title as the property’s legally recognised owner.

There are 3 forms of ownership:
Personal name, Company and Trust .

For each form, there's are  different implications for your property’s security and tax effectiveness.  It’s important to determine the appropriate form of ownership before you begin buying real estate , because by changing it afterwards, you could be up for thousands in additional stamp duty and/or capital gains tax (CGT).

Each form of ownership types suits individual needs, hence has a range of pros and cons.

Your Personal Name

Under this form of ownership,a person(s) name is required to appear on the title to the property.

Generally, a suitable title for majority of residential property is a personal name ownership which  enables them to claim a full capital gain tax exemption.

On the other hand, having the title of the property in your name  means that when the property becomes positively geared or its sold, you must pay tax in your name at your marginal rate. Additionally claims can be made on your property in the event of debt.

A Limited Liability Company

The specifics on purchasing an investment property in the name of a Limited liability company  are quite complex andmy best advice is getting professional advice first.

Generally speaking,  a company is a separate legal entity. It can own assets, must pay tax on them, and lodge tax returns.

However, company ownership is not usually appropriate for owner occupiers, because companies aren’t eligible for a full capital gain tax (CGT) exemption. This can be the preference of companies looking to purchase their own corporate premises or in some cases, for commercial properties.

Trust

Buying a property using a trust is an increasingly common ownership structure for residential property investors. For a large number of good reasons ranging from tax benefits,asset protection and it can be a smart way of estate planning, your demise will not affect the ownership of the property because the Trust doesn't die.

NB: Trust is most viable when you are looking to hold the property long term.

Unlike the other forms of ownership, a trust is not a separate legal entity. It is a vehicle to hold assets on behalf of nominated beneficiaries (that is, the individuals or companies whom you wish to receive income or capital gains from the trust’s assets).

On theflipside, trusts can only distribute profits, not losses. This makes them unsuitable for most residential property investors, who rely on negative gearing benefits to hold their assets.

There are a number of different types of trusts so it is important to speak to your accountant to determine the best fit for your situation.

However in summary:
Your own name - not really tax efficient if you are at the top tax bracket, assets exposed to creditors on your demise, you've got trouble.

A Company - a bit better than personal, but still not the ideal vehicle when you look at the massive capital gains tax consequences, extra costs, et cetera.

A Trust or Us, if you're looking for the whole package, then it's a Trust that you should consider.

It is however important that you know your strategy: short term, medium term, long term.

Thank you,
DeCEO Homes.