Company to rent IP

[BlackSpider]

Is this possible?
As part of a salary package, can my own company provide accomodation to myself and wife (both directors), by renting my own IP?
This would be purely for depreciation and tax deductability, as the property will be brand new.

Or, is there any other creative way of doing it?
The reason is that my parents will live next door (duplex) and I need to be close by to care for them.

Thanks

 

[Collector]

I'm sure you can so long as it is your company pays you market rent.

 

[Trogdor]

Im no accountant but I think company may be liable for FBT if it does this.

 

[Rob G.]

Is this possible?

As part of a salary package, can my own company provide accomodation to myself and wife (both directors), by renting my own IP?

Do you mean that your company pays/reimburses YOUR expenses of occupying YOUR property as your "usual place of abode".

In this case no depreciation deductions for either parties, the company is not the holder of the asset and you are not using the property as a rental IP for your assessable income.

In addition, fringe benefit tax will be payable by your employer since the expenses are not otherwise deductible to you for an income producing activity.

Usually the FBT applying to private benefits that don't attract exemptions or concessions puts you in no better position, and sometimes worse, than if you took salary and wages and paid the expenses yourselves.

One exception (subject to limits) is when your employer is a public hospital or tax exempt charity, however you use the phrase "my own company" so this is unlikely to be the case.

Cheers,

Rob

 

[BlackSpider]

Thanks for the replies.
Ok, I understand a little more about FBT now.

From what I can see, it would still be an advantage to do it this way.
Rob, can't my company rent the property on behalf of the directors for accomodation?
We work long hours and the property is very close to the place of our business.

If this is possible, can I not claim depreciation and deductions on the IP being rented by the company?

 

[Rob G.]

Rob, can't my company rent the property on behalf of the directors for accomodation?
We work long hours and the property is very close to the place of our business.

If this is possible, can I not claim depreciation and deductions on the IP being rented by the company?

A company can provide accomodation for its employees.

It will usually be subject to FBT unless this is in a remote area.

If it is subject to FBT, then depreciation is not otherwise deductible from the taxable value, whilst interest might be.

The real issues you want to know is about your company renting from yourself and then allowing you to live in it so you can claim personal tax deductions in excess of any rental income you derive.

We know that a company reimbursing your private accomodation expenses is not generating your assessable income - no deductions for you and FBT for your company (previous post).

Does fixing the payment to you at market value in a contract claiming to be arm's length "rent" make your ownership expenses tax deductible against this "rental income" while occupying the same property ?

The first problem is Part IVA, which denies deductions for schemes with a dominant purpose of gaining a tax advantage.

If you can show that your company would have rented ANY suitable property regardless then you have an argument.

This could consider facts such as where the employer provides remote area housing, or whether other employees (other than yourselves) could use that property.

However, if the arrangement does not make sense in the absence of the additional personal tax deductions then you have a problem.

The ATO could also argue that the arrangement only arose because you are controlling shareholders and could deem the "rent" to be dividends, denying deductions for both yourselves and your company.

Check out MT 2019.

I suggest getting a private ruling both for yourselves and your company to clarify for both parties.

Cheers,

Rob

 

[BlackSpider]

Rob,

Thanks very much for your detailed explaination.
I will investigate further into this.

Spider.