structure your way to success

Master Class:

Structure Your Way to Success

With

David Hows - Real Estate Investar

Tony Lee – Lee & Lee Accountants

We help investors

build and manage

their property portfolios

In partnership with…

Real Estate Investar’s tools

Master class webinars

• Designed to share knowledge.

• Desire to provide extra value to our clients.

• Great for both new and experienced investors.

• Plenty of opportunity for Q&A.

• We will run these regularly throughout the year, and sometimes involve our partners to provide additional insight.

Poll Question

How many investment properties do you own?

Structure Your Way to Success

Connecting the Dots Together

Meet the presenterTony Lee Founder and Director of Lee & Lee

Property tax, investment and business

structuring expert with 20 years experience

in helping small business owner and

property investors structure and protect

their business and investment assets

effectively, minimise their tax obligations

and build wealth.

He has invested in property himself which

means he has faced the same issues that

property investors and developers can face.

As a result, his team has firsthand

experience and an excellent understanding

of finance, strategies, structuring, planning

and timing when it comes to property

investment.

One key message

for tonight:

“It’s NOT about what you make…

it’s about WHAT YOU KEEP!”If you do nothing, you will most likely

end up paying more tax than you need

Who Is this webinar for

Small business owners, property

investors and developers who;

Want to plan to minimise your tax

Want the best way to structure the ownership of

your investments and protect your assets

Want to invest in property with your

superannuation fund and learn the benefits and

risks involved in buying property with an SMSF

What you will learn tonight

Top 5 strategies to maximise your tax

The keys to minimising your tax legally

7 key steps to determine the right structure for

your property investments and developments

How to invest in property with your

superannuation fund and learn the benefits and

risks involved in buying property with your super

in an SMSF;

How to build a property portfolio with your

super and pay little or no tax in retirement

What you will receive tonight

At the end of tonight’s

webinar, all attendees can

download:

eReport “Must know tax

tips for property investors

The opportunity for a

FREE 15-30 minute one-

on-one consultation

5 Top tips 5 Top tips for property investors Depreciation Write off – Scrapping schedule, renovation, ATO

will pay for your scrap on fixture & fittings Tax variation Prepayment of interest & seminar, travel expenses Fully write off on borrowing cost for refinance

5 Top Tips for SMSF You got to have one, Like a tax haven, Control & flexibility Insurance Borrowing (leverage) & residential property Superannuation is a trust structure NOT an investment

There are THREE ways to

lower your tax

To put more of every dollar in your pocket instead of the ATOs!

Negative Gearing – Tax deduction for

interest on income earning investments. Negative gearing is arguably the most generous tax break

available to Australian property investors.

Dividend imputation – Refund of tax paid by companies on profits paid as dividends

SUPERANNUATION – Tax deduction for contributions, low tax on investment earnings

Poll question

Does your current structure minimise tax and protect

your assets?

Case study – Jack & RoseJointly owns 4 investment properties both making $85K & $60K per year

Background: • Happily married couple with no children• Both healthy and fit • Own their PPR with 50% equity and good

saving history• Want to purchase their first 4 investment

properties • Both combined annual income of $145,000

and can save $500 per week• Want to use the equity from their PPR to

build and create wealth through real estate

Case study – Jack & Rose

Goals and Objectives: • Minimise their personal tax • Access to negative gearing and tax

benefit• Not too concern about asset protection • Start building and create wealth• Paying down home loan quickly • Land tax exemption • Easy finance and borrowing• Keep it simple and easy to maintain• Not too complex

Solution:• Buy in personal names (Jointly)

Case study – Jack & Rose

Jack owns 4 investment properties Jack without investment property

$85,164 PAYG earnings($38,855) Rental deductions($22,602) Depreciation & borrowing expenses

$20,872 Tax withheld$43,982 Taxable income$ 6,303 Tax Payable incl. Medical & Flood levy

$14,568 Tax Refund/Savings

Tax Paid 7.40%Tax Savings 17.60% (Before 25%, Extra Monthly Cash flow $1,214

$85,164 PAYG earnings($ 0) NO Rental deductions($ 0) Depreciation & borrowing expenses

$20,872 Tax withheld$85,164 Taxable income$20,094 Tax Payable $777.55 Tax Refund/Savings

Tax paid 23.59% Tax Savings 1.41%

Prognosis

Lee & Lee developmentsHolland Park project

© 2010 Lee & Lee Accountants

Lee & Lee Developments

• Bought land $337K

• DA,BA, Reno Costs $129K

• Construction 2 Duplex (SUD) $330K

• Council fees, Contributions,

& Finance, Interests, GST $183K

Total Development Costs $979K

• Re-value of project $1.5M

(3 properties)

• Nett Equity/Profit $521K


A Property

Trust

A Property Development Company

Pty Ltd

Why is this the recommended structure for the Lee & Lee?

What can be achieved under this structure:Asset Protection – Protection of all private family assets, including family home in the event of litigation or personal bankruptcy;

Tax Minimisation & Flexibility - Maximum flexibility in determining and distributing taxable profits and capital gains to family member, other loss trusts so that ultimately the minimum amount of tax is paid

Succession Planning – Maximum options and minimal CGT/stamp duty when the property is transferred to the next generation

Dream Retirement Lifestyle

Be Comfortable

FREEDOM

$1.5M

Passive Income

How Would Your Retirement Lifestyle Be Different?

Living The Dreams

Feel Safe & Secure

$1.5M in

Retirement!Retirement is a

journey,

not a destination

2040

Financially independent

2013

Private schooling for the 3 kids

2025

France for 6 months

Financial road map

2020

Mortgage Free

2030

Holiday Houseat Gold Coast

Aussie Hugh now needs

to decide how he intends

to get there, by when,

how much it will cost and

what risk he is prepared

to take

1 in 100

chance of

an accident

18 Hours

$200 + petrol +

accommodation

1 in

20,000

chance

of an

accident

2 Hours

20 minutes

$300

1 in 1,417

chance

of an

accident

83 to 100

Hours

1 in 50,000

chance of

an accident

25

Hours

$392

AUSSIE HUGH (40) now needs to decide how he

intends to get there, by when, how much it will cost

and what risk he is prepared to take.

Retirement with

$100,000 in

today’s dollars

lasting until 100

years old

Retirement

age 75

Growth

Cost & Return

Risk over 1 to 2 year

Passive income

required…

“Why Structuring?”

First financial battle

Making the money

Second financial battle

Keeping the money

Interesting statistic

“97% of all millionaires made their money in real estate…but 79% of those individuals lost their wealth because they didn’t structure their investment properties correctly”

Fortune Magazine


Where does your money go?

Your income


Tax47%

You53%

Where does your money go?Your Income


Tax30%

You70%

Where does your money go?

Your income


You85%

Tax15%

Where does your money go?Your income


You100%

WRITTEN PLANUNWRITTEN PLAN

5 Secrets of successPurpose, Passion, Planning, People & Persistence


Fun

ConcernExperience

Invest in property & developments

Fun Success!

Poor structure, unexpected expenses,

bad JVs, business scams, ATO audit

Business booming, making lots of money

Bankruptcy,

Divorce,

Broke,

Jail

Go

od

Tim

es

No

t So

Go

od

Tim

es

BA

Financial success plan

Property

Investment &

Development Plan

Taxation

PlanDebt Plan

Get Financially Organised

Asset

Protection Plan

& Structures

Goals &

ObjectiveSuperannuation & Retirement

Plan

Estate &

Risk Plan

Business

Plan


Executable plan & strategy

Investment Property 1


PrimaryPlace of

Residence


Net wages Tax Super

Start (optimise)

$2M (now) $16M (Total freedom)$8M$4M

Saving & investing (growing) Goal accomplished



SetGoal

Create plan

STICK TO Plan

Property

Tax & finance

Family super

Risk & education

Personal development

Structure

OWNERSHIP STRUCTURE COMPANY & TRUST & SMSF

Commonly used tax structures

• Individual (Up to 45%)

(Plus Medicare levy / temporary flood levy)

• Partnership

• Company

• Trust (Different types of trust)

• SMSF (It’s a structure not an investment)

Give super a go

TrustDistributes to

Individual, Trust & Company

Company Pty Ltd30%


SMSFEarning 15%

Capital Gains 10% Pension Phase

0%

Keys to determine the right structure


Asset protection1Limited liability protection

Tax minimisation Flexibility

Total control & privacy

Succession planning Effectiveness

Finance & land tax

Complexity & costs

2

3

4

5

67

What is the correct structure for your personal situation?

7

Master plan for your wealth

A

Trust

A Company P/L

ABC

B

Trust

B Company P/L

ABC

C

Trust

C Company P/L

ABC

D

Trust

D Company P/L

ABC

E

Trust

E Company P/L

ABC

PROFIT Distribution

PROFIT TAX LOSS PROFIT TAX LOSS PROFIT

PROFIT Distribution


Master plan for your wealth

Phase 1

Phase 2Master Trust

A Master Company

Bare Trust

Trustee Company

Super Fund

SMSF Company

IP Phase 3


Lee & Lee developmentsAnnerley Project “B”

Lee & Lee developments

• Bought land $1M

• DA,BA, other costs $37K

• Construction 5 townhouses

& House renovation $1.12M

• Council fees, contributions,

& finance, interest, GST,

Strata & contingency $258K

Total development Costs $2.4M

• Re-value of project $3.2M

(6 properties)

• Net equity/profit $800K

Annerley Project “B”

What was your real intention?

Consider

Property investment & development

Need to consider

Income tax

CGT

GST

Land tax

Stamp duty

Property development agreement model

Smart Property

Developer

Alan PropertyHolding

Trust

Alan Property Owner Company Pty Ltd


Bruce Property Developer & Project

Management Company

Pty Ltd

CharlieInvestment

Holding Trust

Charlie Investor

Company Pty Ltd

Accountant Land Owner

A Property

Trust

A Property Development Company

Pty Ltd

Why is this the recommended structure for Adam and Eve?

What can be achieved under this structure:Asset Protection – Protection of all private family assets, including family home, in the

event of litigation or personal bankruptcy;

Tax Minimisation & Flexibility - Maximum flexibility in determining and distributing taxable profits and capital gains to family member, other loss trusts so that ultimately the minimum amount of tax is paid

Succession Planning – Maximum options and minimal CGT/stamp duty/Land tax when the property is transferred to the next generation

Commonly used tax structures Single developer with a JV partner


ABC Property Development

Company Pty Ltd

A Property Development

Company Pty Ltd

B Property Development

Company Pty Ltd

A Family Trust

B Family Trust

ABC Unit Trust

Commonly used tax structures 2 family groups - JV deal


A Property Development

Company Pty Ltd

B Property Development

Company Pty Ltd

B Family Trust

A Family Trust

Appropriate record keeping

It’s TAX Time

Investment Propertysa

veTA

X

REMEMBER“It’s NOT about what you make…

it’s about WHAT YOU KEEP!”

WHYDo you want to maximise how much of your

income you keep, so you can confidently

plan your retirement and save tax?

7 Most Common Mistakes

Depreciation

Interest expenses

Borrowing costs

Discharge finance costs

Land tax

Travel & home office

Capital gains/PPR

1

2

3

4

5

67

Think Differently

Poll question

Are you interested in investing in property

with a SMSF?


Tax differently

Accumulation Phase

15%(Max )

Pension Phase

0%(Max )

Benefits of family super fund

FullFlexibility

&Leverage

(Ability to Borrow)

CONTROLInvestment

ChoiceTax

EffectiveAsset

Protection


It’s tax freeIt’s works like

magic

It’s beautifulIt’s controlled

by you

The magic of structure

How the SMSF borrowing structure strategy works

HoldingTrust (Legal

Ownership)

Corporate Trustee

Holding Company

Self Managed Super Fund

SMSF

SMSF Corporate

Trustee Company

Lender• Bank • Member or • Related Party

Provides SecurityTo Lender

Lender Provides65-80% Mortgage To SMSF Non recourse

(LRBA)

Rental IncomeRental Expenses

Including Depreciation

SuperContributions Roll OversRental Income

Declaration ofTrust,

Holds Legal Title while

Borrowing Exists

Legally owns the property (SMSF is sole beneficiary and has absolute entitlement to bare trust property)

SMSF makes Loan Repayment

What can be achieved under this structure: Owning an Income producing asset in the lowest tax environment Have ability to create greater after tax wealth More after tax dollars kept to reinvest or reduce debt Debt can be paid off faster before retire The faster a loan is repaid the less interest is charged and paidMore saving and reinvesting for retirement for a better financial future

Poll question

How much super do you currently have?

Background:• Happily married couple with 2 children • Both healthy and fit • Own their PPR with 75% equity and have automatic saving strategy• Have already got 5 investment properties worth $2 millions• Want to do their first duplex deal in Brisbane with buy and hold long term

strategy• Both combined annual income of $200,000 from their successful

consulting business• Both have combined superannuation balance of $300,000• Want to use the equity from their PPR to build more wealth through

property development • Already found a suitable site • Already have available equity to draw down• Already have finance approval for the development

Case study three – Adam & EveOwns 5 investment properties

Goals and Objectives: • Accelerate and fast track their wealth creation • Require control and asset protection is essential • Tax efficiency and flexibility with income & capital gains • Buy, develop and hold long term for capital growth

Solution:• Buy in a company/trust structure

(GST implications to consider)

Case study three – Adam & EveOwns 5 investment properties

Set up automatic savings


j

j

Retirement 10% pay yourself first1

Emergency 5%

6-12 months expenses

Dream holidayPay off home

Credit cards, bills, investments & charity….

3

4

5

Income (MSI)

Bank Account

2

Strategy #1 The Fast Tracker

What can be achieved SMSF property borrowing strategy: Owning an income producing asset in the lowest tax structure in 10 years Creating $1,500,000 for retirement and have a peace of mind

AutomaticSavings Strategy

And you can tackle these problems..


• The need to support your family

• Reinvesting back in your business

• Pay too much tax

• Saving for retirement to fund your lifestyle

The biggest struggles everyone faces

There is a

to legally reduce taxes

Imagine yourself

20 years from now

What are

your goals

&

objectives?

What’s the

goal?

E.g.$1.5M

dream

retirement

You are here today…

Freedom Gap


What’s your next step?

We help you make smart financial decisions and connect the dots together and create a

remarkable future!

Special REI client offer

A complimentary 15-30 minute strategy

session with Tony Lee on getting the right

structure in place and taking control of

your financial future. Using an SMSF

property strategy can help reduce your tax

and increase your wealth.

Limited to ONLY 25 consultations

First in best dressed!

info.realestateinvestar.com.au/leeandlee

REMEMBER“It’s NOT about what you make…

it’s about WHAT YOU KEEP!”

Q&A session

Limited to ONLY 25 consultations

info.realestateinvestar.com.au/leeandlee