Adding control

Over the next week or so we'll be telling you all about a couple of changes in the weird and wonderful world of trusts as interpretations of recent - and ongoing - case law start coming to light. Information from our legal team is still filtering through, so we'll be sure to keep you posted as the fine print is digested and can be translated into something that makes sense to everyone.

The first of these changes is the introduction of a new role available for any future trusts that you might be looking to set up. This role is called the 'controller', and does exactly as it suggests.

Always nice to have control...
Always nice to be in control...

The idea being, that this third party can veto or approve any changes to the structure that the trustee may wish to make. Such changes could include adding or removing any of the beneficiaries, adjusting the vesting date, or, editing the trust deed. This gives better control over the structure, particularly in the unfortunate circumstances of it being examined in court.

The role is not a mandatory one, but future deeds will at least have the potential to appoint such a person. Advice to date suggests that this controller should ideally be a natural person, and a third party to the existing appointor and trustee. So, appropriate persons could include your solicitor or other professional advisor, or perhaps a trusted friend.

Even if the position will remain vacant to begin with, we do recommend that new trusts should be created with this role available so that it can be filled at a later stage. We have also been advised, though, that older deeds cannot add the position to the existing structure without re-settling the trust.

Of course, as always, just shout if you want more information or guidance on this or any other structural issues. We'll be happy to help.

Price versus terms

Once upon a time, I took a short break from the accounting industry to play the real estate game, working for a couple of local agents. Whilst I'd never, ever go back to it, the experience was certainly an enlightening one and a hell of a lot of fun while it lasted.

One of the many things that I learned during this time was how to negotiate. And that, auctions aside, the highest price does not always win.

Let me elaborate on that last point.

When making an offer, there are a number of things that make up the detail of the contract. In particular, the following are all key points that can be negotiated;

  • price
  • deposit
  • settlement date
  • treatment of existing tenants
  • treatment of existing fixtures and fittings
  • finance and valuation clauses
  • expiry date for acceptance
  • other clauses; such as building and pest inspections, vendor finance, access before settlement, etc.

I remember one particular property that I didn't sell, not long after I started the game and still fairly green. I was dealing with a first home buyer, cashed up, and they offered well over asking price. Their offer was something like $360,000 on a ninety day settlement; subject to finance approval, building inspection, and vacant possession with access before settlement to start painting the walls.

Its all about power, no?
Choose your weapons carefully. What is going to get you closer to getting what you want?

The other agent in the office pulled in an offer on the same property at about the same time, and the listing agent took both to the vendor. Up until this point, I had no idea what the other agent had in the envelope. Turns out, they were offering $40k less than mine, but completely unconditional with a thirty day settlement.

Price versus terms. The vendor accepted the unconditional offer because it was fast money, and much less risk of something going wrong.

So, it pays as a buyer - and an agent! - to find out what the vendor is looking for. Are they in a fixed timeframe to sell or settle? Do you really need a building or pest inspection done? Is your finance already preapproved and do you already know that the valuation should be ok? Are you happy to keep the existing tenants or would you rather find your own?

As we all know, money isn't the be all and end all in life. Nor is it the only key point in the negotiation of a potential purchase. So, be creative!

Forest for the trees

Buying trees don't always yield much of the green stuff for you...

Following on from other recent posts about goal-setting, I thought it might be worthwhile to look at one of the traps that we see people falling into from time to time. The agri-business sector has, for a long time, been promoted as an avenue towards paying less tax by borrowing money to 'invest' in trees or olives or other such things that tend not to provide much of a yield or growth.

Many of these managed investment schemes also tend to pay ridiculously high commissions to financial planners and accountants when they recommend such products to their clients.

Important note - we never have.

Sure, paying less tax is always nice. I won't argue with that idea. But, it is far more important to keep sight of your goals and act with those in mind.

Dale used to teach us this focus by asking one simple question; "Does that idea bring you closer to, or, further away from, your goals?'

I think that this is a good way to look at any financial decision. Does buying a collection of trees bring you closer to your goals? Generally not, I'd suggest, unless you own a nursery or can see potential to flog them at a profit come December. Very rarely do we see anyone make a profit out of these things.

A couple of these companies have gone under in the last twelve months, too, which might also give a good indication of just how sound this type of 'investment' might be...

There are much more important things to focus on than paying less tax. A massive tax bill usually means you've made a massive profit - and that's hardly something to get too upset about. It also highlights the importance of talking these things over with your accountant well before the financial year is already over, to make sure that you're still on the right track and not getting sucked into schemes that usually just don't add up.

Changing priorities

Giving this beautiful animal a cuddle was on my list once, but Ive done that now!
Giving this beautiful animal a cuddle was on my to-do list once, but I've done that now!

Hey, look at that. I've worked out how to get pretty pictures onto the blog. I dunno about you, but I'm rather impressed. This wordpress thing is pretty awesome.

Anyway, today's story is about how things in life will, as a given, change from time to time. There are very few constants, as we all know, which does make planning ahead a little difficult at times.

Based on the feedback that we get, one of the most popular parts of our website is the team profiles where we each outline some of the really cool things that we've done in the past, and what we want to achieve in the next ten years or so. If you haven't seen them already, check it out. Inspirational stuff from our team and I can't wait to see them add to their list of achievements.

I've written before about how important it is to write down your goals, add a timeline to them, and then start plotting the steps to make it all happen. However, as time progresses, we can find that what used to be so important is suddenly replaced by something that you've developed a greater passion for.

And so, whilst identifying your goals and committing to them is crucial, I also believe that it's worthwhile reviewing them on a regular basis. Keeping that fire burning, that absolute desire to achieve, is driven by the raw passion towards that outcome (or for some of us, the journey itself). There is no shame to be found in discovering that a goal set last year is no longer as relevant, and keeping those goals updated and in focus will only help with taking the steps to achieve them.

So, I have taken the time recently to review my own goals in light of my changing priorities. Whilst some have stayed the same, others have changed and a few have simply moved up the order as I get closer to getting what I want.

How about you? Have you taken the time to identify what you are working towards? If not, why not? Make it happen, people; we both know that you're brilliant enough to achieve almost anything, so work out exactly what you want, and when you want it. And then, review it on a regular basis and keep that passion burning. It's a beautiful thing.

For research, of course

We received notice last night of a tax office response to a court case held last year, which determined that a travel agent was able to claim the significant costs of overseas travel to further his knowledge base and thus increase his income from his regular employment.

If you've got the time and inclination, you can read about it, here; Carlos Sanchez v Commissioner of Taxation.

Whilst this may not necessarily be directly related to your own circumstances (although I know that there are one or two agents reading this), these sorts of things do provide interesting insight about the thought processes at tax office and how they deal with these sorts of issues.

In this case, the travel agent in question earned a little under $40k in the 2005 year (made of retainer, commissions and bonuses), which increased to some degree in the following two. The agent also claimed around $10k in travel expenses - a good quarter of his income - despite being on annual leave at the time and receiving no allowance from his employer.

The tribunal stated;

The Tribunal was satisfied that the applicant's calling as a travel sales consultant required degrees of knowledge and skill that would benefit from personal experience of the travel components he sold to his customers, and that the 2005 overseas travel directly contributed to that knowledge and skill, and also contributed (or was likely to contribute) to his earning increased income.

The Commissioner accepted this view and allowed the majority of the deduction. It is important to note that the agent took comprehensive notes during his travels and this contributed strongly to the treatment of his case. It's also important to note that the tax office eventually disallowed a good portion of the agent's claims on the basis that he could not properly substantiate them. So even though the basis of the claim was decided to be alright, the tax office still went through with a fine tooth comb to make sure that the actual cost could be proven.

So! Lessons to be learned from this, in all of your potential deductions; keep damn good records. And if you're doing something significant, keep extensive notes about the how and why of what you're trying to achieve. It might seem a little painful at the time (especially if you're supposed to be out exploring Spain instead - for research, of course) but it may count for a lot in the long run.