Property Buyers! Are you looking at purchasing a property in Perth? Before writing your name on the contract, we here at Essence Conveyancing wanted to have a quick discussion with you about purchasing entities.
After all, there are a lot of decisions that you need to consider. From looking at the area you want to buy in, considering whether to buy a home, unit or an apartment; and tossing up whether you want an older home that requires renovations or a newly built home – there are a lot of key decisions to be made.
In this article, we are exploring purchasing entities, and the importance of speaking to a professional before signing on the dotted line.
Firstly, here are the primary structures found amongst purchasing entities:
#1 Individual:
When purchasing as an individual, your financial and legal responsibilities are not limited or protected. This means that the individual owners of the property are liable legally for the property.
#2 Joint names/ownership:
Joint ventures are a great way for friends and associates to pool their funds in order to purchase an investment property. This joint effort lowers the barriers that would otherwise exist if purchasing on your own, as you can combine yours with others’ deposits when applying for loans. This also allows more individuals involved in the property purchase, and may lead you down an easier path towards bank approval.
#3 Company
One way to limit your legal and financial liability is to purchase property as a company. A company may attract a lower rate of tax on any net rental income from the property, and individuals will (to an extent) be protected from liability.
#4 Trusts
There are many benefits to setting up trusts, and purchasing your property within a trust. Although it can be complex to initially set up, if done right, these entities might just save you money down the road.
#5 SMSF
The increased popularity of purchasing property through Self-Managed Superannuation Funds (SMSF) is due in large part to their ability not only save you time and money, but also offer tax advantages. However, there are restrictions when managing a SMSF towards buying real estate because certain guidelines must be met before registering this type of transaction as well.
“A great tip to remember for buyers is to get advice on what purchasing entity would suit your unique situation best. If you consider changing the structure down the road, there could be double duty charges that apply. This is especially true if you are purchasing as a trustee or through SMSFs. Be sure to speak to your financial adviser and accountant before you enter into a purchasing contract. I should also note that there are some qualifying relationships that allow you to add or remove buyers on purchases, without duty implications. So, explore your options before you sign on the dotted line.” – Megan Reilly, Director of Essence Conveyancing
Remember, to speak to your accountant or financial adviser prior to making a decision. The Office of State Revenue don’t allow changes easily once you have signed, and can also cause stamp duty issues.
Otherwise, if you have any questions, be sure to chat to Megan from Essence Conveyancing. We are a Perth settlement agency who are here to look after your Perth property settlement.
Disclaimer: Please note, the contents of this article do not constitute conveyancing advice, are not intended to be a substitute for conveyancing advice and should not be relied upon as such. You should seek conveyancing advice or other professional advice in relation to any particular matters you or your organisation may have. To find out more, please contact us.