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                      Real Estate Investment-Ownership Issues

There are a few legally recognised ways you can own properties.

  • In the name of the individual
  • Joint tenancy; surviving partner owns the property
  • Joint names as in a partnership ( Tenancy in common)
  • Company structure
  • Trust asset

There are other issues that has to be taken into consideration on the type of legal
ownership of  property.

  • Control over the property
  • Ease of liquidation to access the capital
  • Protecting your assets from creditors
  • Estate planning consideration
  • Income distribution among family members to reduce overall tax

Before deciding on the type of ownership structure it is advisable to acquire the
service of a lawyer and accountant. There are many pitfalls that the unwary
investor may not be aware of, for instance to transfer property from an individual to
family members may attract stamp duty. The tax authority may not  construe it as a
gift but as a sale, situation varies from individual to individual.

Individual and joint names

  • The individual is subject to a progressive tax structure, i.e. The more you
    earn the more you pay in tax.
  • Having joint names assuming a 50/50 split, income and expenses related to
    the property is divided by two, It will mean a lower tax threshold for each joint
    name and savings in tax.
  • Main residences expenses cannot be offset against income as they are not
    use to generate income.

Company structure

  • The company pays a flat tax rate as compare to individuals which is on a
    progressive basis.
  • Losses cannot be distributed and use to offset the individuals personal tax.
    It can be use against future income in the case of negatively geared
    properties of the company.
  • The amount of dividend and its timing can be control to coincide with various
    income level; i.e. a higher payout of dividend when income is low and no
    dividends when individual income is high.
  • Many expenses which are not deductible from an individual standpoint can
    be deducted by the company. There is however a percentage cap on the
    amount of expenses available for deduction.
  • Estate duty implication; as a company the shares in the company are
    considered similar to stocks and shares in the stock exchange and it is
    construed as liquid by the estate duty office. It will be considered as liquid
    asset as shares are disposable easily as presumed by the authorities and
    will attract estate tax at a lower threshold.

Trust structure

  • The trustee has the right to distribute income among the beneficiaries to
    maximise tax advantage.
  • Income not distributed are subject to a higher tax rate (corporate rate).
  • Losses cannot be distributed and use to offset the individuals personal tax.
    It can be use against future income in the case of negatively geared
    properties of the trust.


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