Investing in properties as a business - NO CGT

[WebBoard]

From: Anonymous


Recently speaking to some highly successful property investors they told me they register a company & buy & sell properties under the company name,when asking what is the advantage they mentioned that they do not pay capital gains tax but pay income/business tax instead. They register the profits under the lowest income earners (in their case their wives as they aren't working).Does anyone else do this or know much about the tax advantages? how do you buy the properties under the company name or your personal name?
thankyou

 

[WebBoard]

Reply: 1
From: Andrew D


I am currently setting up a company (Corporate Trustee) and a Trust for the explicit purpose of buying property. This allows me not only asset protection but a means to split income between myself and wife as I wish (Discretionary trust). If you are looking at property long term it may be worthwhile but you should speak to your own accountant and see if they think it fits your plan .

Enjoy

AD

Hurdles are merely stepping stones for the successful.

 

[Kristine..]

Reply: 2
From: Kristine .


Dear Anonymous

Perhaps your learned friends can tell you why it is better to pay company rate tax on every dollar profit, and then pay income tax on your earnings as a director of the company, than simply to pay income tax on your earnings as an investor?

And what happens if your trading stock is held over, and then shows capital gain? Capital gains tax is now calculated at 50% of the capital gain goes to your income tax assessment for the year of sale.

So even if you are earning in excess on $60,001, and therefore paying 47% tax on the excess above that threshold, 50% of capital gains means you may pay a maximum of 23.5% tax. and obviously, if you earn below the threshold, the tax rate is less.

Please explain to me again how an expensive to establish, expensive to audit, and cumbersome to deal with, trust is better than a straightforward trade?

All this mystique about trusts leaves me baffled. I have had personal dealings with people who have set trusts up on the advice of their accountant (who earned a fee for doing so, and an audit fee every year thereafter), and the trust has brought no tax relief and no joy either.

Life is meant to be simple. Please explain why complicated is better.

Cheers

Kristine

 

[Sim]

Reply: 2.1
From: Sim' Hampel


Trusts are first and foremost an asset protection vehicle, not a tax minimisation vehicle. In the right circumstances they can help minimise tax, but you also lose in other areas.