Buying IP's as a company

Hi,

What are the advantages of buying/selling investment properties as a company not as an individual?

My understanding is that the good things about it are: no personal liability, only %30 income tax, not sure about CGT I think it's three thirds of the capital gain?

Any ideas? is anybody actually doing it?
Thanks.
 
I am doing this with a property that I am planning on reselling soon (less than 12 months after settlement). This means I do not pay CGT, but company tax, since the only thing my company trades in is RE.
 
Originally posted by Iggy_Type_R
I am doing this with a property that I am planning on reselling soon (less than 12 months after settlement). This means I do not pay CGT, but company tax, since the only thing my company trades in is RE.
Hi Iggy_Type_R,

Could you tell me a little more about it. If you sell within 12 months after settlement you don't need to pay CGT? would it make any difference if your company was trading in other industry as well as RE? What are other advantages of running a company for investing/reselling properties? Why some people setup more than one company? And can your company rent a property to yourself? Would appreciate any info. Thanks.
 
Heya,

I am not an expert, so I hope I don't give you misinformation... better off asking a solicitor :)

The 12 months thing that I mention is because if you sell a place that you bought on your own name within 12 months of settlement you are paying 50%CGT, over 12 months and you pay 50% CGT on 50% of the profit (ie 25% CGT).

I am not sure if you can avoid CGT if you do more than just trade RE with a company... sorry cant be of more help.

I am doing it to avoid CGT and to have "protection" of a PTY LTD.
 
Originally posted by h8dk97
Hi Iggy_Type_R,

Could you tell me a little more about it. If you sell within 12 months after settlement you don't need to pay CGT? would it make any difference if your company was trading in other industry as well as RE? What are other advantages of running a company for investing/reselling properties? Why some people setup more than one company? And can your company rent a property to yourself? Would appreciate any info. Thanks.
If an entity is conducting business of trading real estate it's holdings are stock in trade and CGT does not apply.

You can rent from an entity you control (watch out for Self Managed Super Funds). If the transaction is at commercial rates then it treats the rent as income.

Multiple entities are designed for advanced asset protection, finance or risk strategies.

Consider a trust with a company trustee. There are CGT advantages.

Regards

Paul Zag
 
Originally posted by paulzag
If an entity is conducting business of trading real estate it's holdings are stock in trade and CGT does not apply.

You can rent from an entity you control (watch out for Self Managed Super Funds). If the transaction is at commercial rates then it treats the rent as income.

Multiple entities are designed for advanced asset protection, finance or risk strategies.

Consider a trust with a company trustee. There are CGT advantages.

Regards

Paul Zag
Paul and Iggy_Type_R, thank you for the info.

I would like to find out more about this, could you recommend some literature or any other sources.
 
Originally posted by Iggy_Type_R
Heya,

I am not an expert, so I hope I don't give you misinformation... better off asking a solicitor :)

The 12 months thing that I mention is because if you sell a place that you bought on your own name within 12 months of settlement you are paying 50%CGT, over 12 months and you pay 50% CGT on 50% of the profit (ie 25% CGT).

I am not sure if you can avoid CGT if you do more than just trade RE with a company... sorry cant be of more help.

I am doing it to avoid CGT and to have "protection" of a PTY LTD.

Very politely - may I ask where you get this information from?

This is not correct.

check the www.ato.gov.au website and you will see that Capital Gains Tax is personal tax rates applied to a percentage of the net capital gain.

Certainly not 25%

Cheers

Kristine
 
Hi Kristine

You are both correct.

CGT is paid at the margin tax rate of the individual which may be anywhere up to 48.5%, as you state.

However, with the 50% general exemption the gain is "effectively" taxed at 1/2 of the margin tax rate which may mean tax is paid at 25% of the actual gain.

As a rule of thumb, I quote 25% as a worst case scenario and we can work down from there.

Does this help?

Dale
 
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