Assume this is not a unique situation but I couldn't find any current posts covering this.
Basically, I have a family trust with a corporate trustee. Beneficiaries and directors are just me and my wife. We use this to park our 2 investment properties (rented for about $30k per year). We basically put in the shortfall each month out of pocket.
Is this usually eligible for a business credit card? Thanks for any advice.
Except it's hardly a brag it's just someone with an insanely complicated tax arrangement.
Assume this is not a unique situation but I couldn't find any current posts covering this.
It may not technically be unique but I guarantee you the vast vast majority of OzBargainers are keeping things much simpler.
The "dude" hasn't provided any background as to why he has this configuration but presumably he wants the flexibility to dole out the income based on circumstance and does not want one partner to own the property in case circumstances change.
The reason for using a trust not a business for property is that the CGT discount still applies. A good thing because…
We basically put in the shortfall each month out of pocket.
The bad news is though negative gearing concessions don't apply.
You would think that one one of the couple is earning a lot of money as a contractor and running it through the business of which…
directors are just me and my wife
But then the question becomes why doesn't he just apply for the card in the business's name? It could be a collateral thing but as CommBank explains most cards just ask for a personal guarantee anyway.
So is the company actually doing nothing and this guy just loves paying accountancy and ASIC fees? Is he wanting to apply for multiple business credit cards to maximise a reward? Or like that Glass Onion movie, does all this have the waft of sophistication but actually isn't clever at all?
The brag is the oddly specific inclusions.
Brilliant response!… amazing the amount of complexity people tolerate for the sake of losing money on $30k of revenue.
Come on Muzeeb
This is not like you.
Usually you are very helpful
How long has the trust been operating? Does it have any type of credit history?
Is it as simple as your family trust owns and operates a Pty Ltd company?
well over 12 months operation. good credit history as the mortgages have been on that. Trustee is a pty ltd.
A friend of mine has had luck with Amex. They had to provide the family trust and profit and loss statements. They were approved for a charge card (no pre-set spending limit).
I know banks like NAB will actually make you link your accounting software (e.g Xero, MYOB) as part of your application and that’s how they verify your income.
Eligibility for a business credit card for a family trust with a corporate trustee can depend on several factors. Here's a general overview:
Corporate Trustee's Financials: Banks often look at the financial stability of the corporate trustee. Since your trust holds investment properties with rental income, the bank will likely consider this income and the overall financial health of the corporate entity.
Personal Guarantees: Even though the trust and corporate trustee are separate legal entities, banks might require personal guarantees from you and your wife, especially since you are both directors and beneficiaries. This is common when the business entity's financial history is not extensive or robust.
Business Purpose: Ensure that you can clearly demonstrate that the properties held in the trust are used for business purposes (investment properties, rental income). Banks typically require that the credit card will be used for legitimate business expenses.
Credit History: Both the credit history of the corporate trustee (if it has any) and your personal credit histories will be scrutinized. Good credit scores can significantly improve your chances of approval.
Documentation: Be prepared to provide comprehensive documentation, including trust deeds, financial statements, tax returns, rental income statements, and any other relevant financial documents.
Given these considerations, it is generally possible for a family trust with a corporate trustee to be eligible for a business credit card.
thanks chatgpt very cool
No problem!
Why would the banks be interested in the cards being used for legitimate business purposes? How would they establish this?
@mskeggs: Some banks strictly prohibit personal spend on business cards and vice versa. Don’t think this is an issue in Australia however, check with your bank.
I think we need this conclusion given from a credit card provider.
No need for this post. Complete waste of everyones time.
OP should just go into his local bank and discuss with them
Does your company trustee have a bank account? If you are already an existing customer, what does the bank say when you try to apply for the business credit card?
yes, trustee pty ltd has a bank account. but haven't applied for a card so far.
Here is what I would do to solve your problem:
brother eww…
Gotta ask Australia's premium advise line first.
Advise saves cents. Cheers
Do you need a credit card? Business debit cards are easy to get.
thanks, yes thinking of keeping one for business expenses and get the perks too hopefully
why would you want a business credit card? for churning?
partly yes, and also to have credit and use card features really.
There aren’t many card features for business cards. If you need credit just use your personal one. I think more people are complaining they can’t use business transactions on personal cards.
things like signup points and higher rate of earning points is appealing
is there a need? not really could just use a transaction account but we're ozbargainers so want points.
Lets say I'm OP and have investment properties. Beyond the usual annual expenses (insurance/rates etc), they will periodically they will need renovations/fixes that benefit me using a card earning points (esp true when I want to DIY to save more money).
Using a personal card is a no-no when it comes to separating personal/trust expenses and adds extra financial management compared to just have both isolated from each other. With the trust likely being positively geared a CC should be hard to obtain (esp. with a personal guarantee) and should allow me to get CC offers only available to businesses, which I otherwise wouldn't have access too (I assume OP doesn't run a business in a personal capacity).
@JDMcarfan: using a personal card is a no-no only if you don't keep receipts. plenty of people with personal cards with business expenses.
what CC offers are you realistically expecting? he's running an investment property. he doesn't need the dell $125 credit a year.
Why can’t you pay for business expenses on your personal credit card? Just keep the invoice or receipt.
yes this is what i do now. but would be better and easier to manage on a biz card. and more perks hopefully
You'll be checking with your lawyer or accountant whether you can use the perks without breaching the trust deed?
Exactly! I inherited a property but can't rent it out due to the terms of the Trust Deed.
I'm not rich enough to even understand the question…
I saw a video about it once, I think it’s a way to increase your borrowing power.
You basically have a trust and then you set up a company and setup trusts beneath it. Then the banks consider it differently for mortgages and you could for example borrow $1.5m instead of say $200k personally. Although it is legal it is relatively complex.
Before reaching full capacity investing in your personal name, consider investing via a trust. If the trust is positively geared, some lenders may not include the debt in the trust connected to the properties as part of any serviceability assessment for additional mortgage finance
https://www.smartpropertyinvestment.com.au/finance/25284-bus…
@AustriaBargain I am pretty new to all this too, but spent a few thousand dollars for an accountant to setup all that and seems worth it. Not that different from having just a regular investment property. I think trust can borrow LESS than personal borrowing and kinda harder to get loans compared to personal mortgages. But a lot of advise out there to show how it can be beneficial in the long run. Here's to hoping.
Classic ozbargain. Cheers
Tradies are known to setup bucket companies to reduce taxes on profits distributed from a trust. It's a tax minimisation strategy.
Not minimisation, delay. Bucket companies are only useful if you have excess funds as any private use of company money is covered by Division 7A, which requires the funds be paid back or to have a legislatively compliant loan agreement in place. Failure to do so deems the loan amount to be income to the borrower by way of a deemed unfranked dividend.
They can be a great tool, but also come with drawbacks
If your trust is a family discretionary trust and only earns residential rental income, then it is not operating a business in the first place.
Take the trust deed to the bank and enquire about opening a credit card in the trust name. But it's not a 'business credit card'.
If you rent commercial property, that's a different story.
Should be fine as long as the card issuers are happy with the trust's financials. I have signed up multiple cards for family trusts before. Amex was easiest to deal with. Westpac was the worst. They asked all beneficiaries to sign up as co-applicants.
Out of interest, why did you put both properties in the trust? Who gave you this financial advice?
You can't negative gear in initial years until it becomes positive. Also, the land tax is applied to the combined land value of the properties if in the same state over the threshold.
And the threshold is 0 in NSW (unless it's a fixed trust) or half of the individual rate in Vic. What state are your properties in?
You just asked yourself a question.
In NSW, a residential property in a family discretionary trust does not get the land tax threshold. Might be different for VIC.
Its also not great in Vic, since 2006 there has been a higher rate for land held in discretionary trusts in Victoria. Threshold is 25K.
https://www.sro.vic.gov.au/land-tax/land-tax-and-trusts
Someone is tempted by the NAB 200K points offer it seems.
im calling the ATO on you
We basically put in the shortfall each month out of pocket.
This suggests to me that the trust is running at a loss and you're propping it up from your personal funds. May struggle to get a business card approved on that basis. I wold be curious to know how you get on OP, please update once you've applied.
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