 Hello everyone, my name is Jaze Delgado. I'm a Corporate Commercial Attorney with specialising structures and tax and property and I'm going to be talking to you guys about a couple of queries that are frequently asked by property investors or persons acquiring residential properties for themselves. First issue we're going to tackle today is what options do I have when I'm looking to acquire property? Do I buy that into my own name? Do I put it in a close corporation? If you can still get one you can't get them anymore. PDY Limited or do I have a trust as an option, which is often a mythical entity that we're also going to debate today. So really it's a question of what are your short term, your medium term, your long term objectives? Are you buying to hold the property for your personal use? Is it a holiday home? Is it a commercial property? Are you an investor? So we could elaborate and spend quite a lot of time on the different options but essentially there are two main points that one needs to think about and if this is a property for you personally, what risk are you exposed to? As far as we're concerned any person who faces any risk should ideally be looking to have this property in an entity other than in their own name. Clearly if you ever get sued or you're in business you have exposure. Buying a property is a major purchase, it's a large acquisition. There's a cost involved so if you are in the wrong structure not really easy to move the property into the appropriate structure if you made the wrong choice. So a lot of effort or time thinking must go into assessing which is the best option for you. So option one is default, most people buy a property into their own name. Very simple, it's in your name, problem is if you run into trouble you could lose your home, that's not ideal. At some point we will die, don't know anyone who's immortal, so yep you're eventually going to snuff it and on your demise you're going to have some serious issues to deal with. Property is caught up in your frozen estate, your spouse, your dependents, other persons, children don't have access to this asset until such time. As your estate is wound up it could take anything from about eight, nine months to one, two, three, four, five years so you're going to be creating serious hardship for whoever's going to be needing to access their property or the rentals or whatever the case is. Pretty expensive exercise to die so try and avoid it at all costs but your death will cost you capital gains tax, the maximum rate at this point is 13.6%. So it's a fairly huge chunk that is going to be coming out of any growth of the property so you want to spare that in mind if the property is in your name, on your demise. On top of that your estate, you will be subjected to executor's fees, also at a maximum legislated rate of 3.9% plus VAT, just under 4%, again a massive chunk and the kicker here is for you to consider that this is a charge on the gross value, not on the net value. Quick example, property is worth 5 million, you have a mortgage of 4 million, your net is 1 million, your executor is taking 4% of the 5 million, not the 1 million so suddenly that's a massive cost but a small percentage just seems pretty harmless. Then of course you are subjected to state duty at a rate of 20% on any assets in excess of 3.5 million, so pretty steep. So if you're buying a property in your own name just know that you have no asset protection, you're subjected to potentially massive costs on your demise and again if you are renting your property are not very tax efficient if you are in the top tax bracket because that rental income will be added to your income further causing you tax issues or more tax to pay. Other options or close corporation if you can still get your hands on one or you have one or PTY limited, a lot of people do consider this as an option because it is a known type of entity and SAAS pretty much has settled the taxation around this so there is some level of comfort. Problem with this is a close corporation or company is not the ideal residential property owning entity because you will eventually pay too much tax as well compared to a trust which we're going to talk about in a minute. So PTY CC your tax rate is 28% to get the cash out of the company or the CC you'll be paying a further dividends tax bringing you effectively to a tax rate of 38.8%. Also a default position is you can have a trust owning a company that in turn owns your property. You are a multiplier or you are creating extra costs which you can possibly avoid by having a more simplified structure. Not a great structure a CC or PTY if you are ever selling a property because you can end up with a huge capital gains tax problem in the company of the CC at an effective rate of 18.6% to get your hands on the profits after tax cost you a further dividends tax of 15% bringing your total taxable to just under 31% so that's ouch. So in your personal name the tax is a little bit better but you have exposure to creditors you have got issues on death you have no continuity CC PTY solving some of the problems but not ideal from a tax perspective. Then we come to the mythical trust which there are proponents who absolutely love them or you have the naysayers who absolutely anti them and there's a lot of uncertainty because the taxation tends to be under the spotlight quite often with trust. Default position though is it's an old entity it's been around forever in this country almost 200 years a trust very simply is like a vault I like to have people think of it as a vault you're going to acquire your property into this entity tax is brilliant in the structure because you can move the income out of a trust so even though it is an entity with a highest tax rate at 41% after the new budget a couple of weeks ago the trustees have got the election to push any rental income down to beneficiaries who then pay at their own marginal rates so this is where you have four or five children or you bring in your mom or your in-laws as many beneficiaries as you'd like to obviously then minimise your tax position also capital gains tax wise if you distribute your gain to a beneficiary it's going to be quite tax effective trusts are very handy as an estate planning tool you'll end up in a position where the assets will continue to exist in this entity that your demise will not affect the ownership of the property because the trust doesn't die very simply in our law there's no limitations or limitation on how long a trust can exist so it can continue perpetuity so great estate planning tool all your hard efforts and your legacies will continue to future generations no capital gains tax on death because the trust doesn't die no estate duty on death because the trust doesn't die no executives fees so it's pretty handy so just to wrap up in conclusion the three options available to you or four if you take the CC bind to your own name okay not very tax efficient if you're the top tax bracket assets exposed to creditors on your demise you'll be trouble CC PDWAR but better than personal but still not the ideal vehicle when you look at the massive capital gains tax consequences extra costs etc so for us if you're looking for the whole package that it's a trust that you should buy it into however caveat what is your strategy short term medium term long term okay or is it a residential commercial property so there's no hard and fast rules but hopefully this is giving you a bit of a heads up on different options available to you get you thinking about what's ideal for you