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REITs - Real Estate Investment Trusts are booming, 23% annual return
Topic Started: 20 Aug 2014, 12:18 PM (1,647 Views)
miw
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A Lurker
21 Aug 2014, 09:55 AM
Also with the CGT, the 21-22% for individuals is final, whereas with companies are 30% and if you want to get it out of the company as either a distribution (dividend) the recipient will need to top-up to their marginal tax rate and if you do it as a capital return or sale of shares in the company there may be a secondary level of CGT on the share appreciation.
Hadn't thought about that. It is definitely a blow against REITs and in favour of the private investor.

This may be why in the US they treat REITs quite differently from other companys tax-wise.

For a normal company, they pay company tax but dividends are taxed at the dividend rate which is different from the income tax rate.

REITs in the US operate tax-free, but in each year they are required to distribute at least 90% of their taxable income as a dividend, and dividends of REITs are taxable as ordinary income, not dividends.

But anyhow, I now have another reason I don't expect resi housing REITs to start to flood the rentals market.
The truth will set you free. But first, it will piss you off.
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b_b
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miw
21 Aug 2014, 03:40 PM
Hadn't thought about that. It is definitely a blow against REITs and in favour of the private investor.

This may be why in the US they treat REITs quite differently from other companys tax-wise.

For a normal company, they pay company tax but dividends are taxed at the dividend rate which is different from the income tax rate.

REITs in the US operate tax-free, but in each year they are required to distribute at least 90% of their taxable income as a dividend, and dividends of REITs are taxable as ordinary income, not dividends.

But anyhow, I now have another reason I don't expect resi housing REITs to start to flood the rentals market.
Australian REITs operated under a unit holding Trust structure (which is what the "T" stands for). As per normal Trust tax law, so long as they distribute 100% of taxable income (which is around 50-70% of cash-flow), they are not taxed at the trust level. So the pre-tax distribution flows to the unit holder.

Each tax year, the REIT sends the unit holder the composition of the distribution. i.e.: what % of the distribution was interest income, rental income, foreign income and capital gains. The individual investor will get taxed on each competent occurring to their tax status.

The US is no different for US investors. Qualifying Australian investors pay a 15% Wht on US REITs, but received a foreign tax credit in return (works the same way as franking).

The REIT structure was invented in the US, and copied in Australia by Lend Lease in 1971, and is now being used in many other parts of the world. Singapore and Japan started in 2001, and lately, Europe, Hong Kong, UK have followed. I understand Chinese REIT legislation is coming.
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Poontang
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I recall my father doing ok on Goodman Group shares, buying in at 15 cents or somewhere there abouts and selling a couple years later for considerably more than that....
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b_b
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Poontang
21 Aug 2014, 05:35 PM
I recall my father doing ok on Goodman Group shares, buying in at 15 cents or somewhere there abouts and selling a couple years later for considerably more than that....
They got to $7 in 2007 - they ended back at 15c in 2009.....
Edited by b_b, 21 Aug 2014, 05:42 PM.
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miw
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b_b
21 Aug 2014, 05:30 PM
Australian REITs operated under a unit holding Trust structure (which is what the "T" stands for). As per normal Trust tax law, so long as they distribute 100% of taxable income (which is around 50-70% of cash-flow), they are not taxed at the trust level. So the pre-tax distribution flows to the unit holder.

Each tax year, the REIT sends the unit holder the composition of the distribution. i.e.: what % of the distribution was interest income, rental income, foreign income and capital gains. The individual investor will get taxed on each competent occurring to their tax status.

The US is no different for US investors. Qualifying Australian investors pay a 15% Wht on US REITs, but received a foreign tax credit in return (works the same way as franking).

The REIT structure was invented in the US, and copied in Australia by Lend Lease in 1971, and is now being used in many other parts of the world. Singapore and Japan started in 2001, and lately, Europe, Hong Kong, UK have followed. I understand Chinese REIT legislation is coming.
Thanks for that. Looks like Australian REITs are taxed in approximately the same way as they are in the US then.
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