What is the best structure for investment properties?

The best structure is one that is fit for purpose to each client personal circumstances and requirement. There is no one size fits all structure.

These are 7 key considerations I look at when putting a structure for a client:

1. Life is full of risks and liabilities and we might run into legal disputes with others and expose your assets to third party claims. Therefore, you might consider having your investment properties in an entity difficult to make claims against.
2. Taxation: Tax should never be the sole reason for choosing a structure, however this does not mean that you don’t consider tax efficiencies. If you have multiple investment income, you might consider choosing a structure that can carry all these investments and help you offset investments losses with investments gains.
3. Number and type of parties involved: Structuring for a family group is completely different from structuring for business partners or other non-individual legal entities. Different parties introduce commercial restrictions and rules that narrow down structure options.
4. Investment income usage: How the investment income will be used and accessed is another driver in the structuring decision. Is it for retirement? Or is it for funding daily and routine expenses? Some structures like SMSF are purely for providing for retirement. If you plan to have easy access to this investment income, probably SMSF is not the right one for you.
5. Succession planning: No one lives forever! Any structure you put in place has to take into consideration your present and future situation.
6. Your exit strategy: Once you exit and sell an investment property, high chances are that you would get capital gain out of it. If you know you are selling in the future, you need to consider structures that are eligible for capital gain tax concessions.
7. Costs & complexities: I have seen incredibly complex structures for investments, related and unrelated legal entities….

The higher the complexity of the structure, the higher the cost and the maintenance requirements. Golden rule here: “Keep it simple!” and make sure the benefit you are getting out of it exceeds its cost.

Is it possible to find a structure that covers 100% all these considerations? It is possible depending on each investor individual situation and requirements.

If covering all these considerations in one structure is not a possibility for you, I recommend choosing top 3 considerations for you and get a structure that covers all 3.

Let me know your thoughts around these structuring considerations