Investing in the Anchorage Estate at Rockingham-Shoalwaters Suburb

[kph]

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Dear Cumown,

1. While technically speaking, I can agree with what you are saying here, my "gross profits" can also effectively be "varied"/"reduced" accordingly when required, to pay out $20,000 worth project management fees as well as other consultancy fees to my own sister companies in Australia and in Singapore respectively.
regards,
Kenneth KOH

Hi Ken,

I am interested in the use of a Singapore company for payment of management fees.
Can you explain what the reason for this is ?
Is there any tax advantage ( eg...tax rates in Singapore are more favourable) in doing this, or maybe to generate some foreign income ?

I guess in the end, its all declared in Australia anyway for local taxation purposes?

Just curious...

kp

 

[AUSPROP.]

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Dear Cumown,

1. While I can generally agree with you here, I also know clearly for myself that it need not neccesarily be true for my case or/and that of my own Perth associates, who are still actively selling their properties and re-investing profitably within Australia.

2. I think the challenge today is for us to remove our own self-limiting mindset that we may be presently possessing without fully realising it and knowing where to look for the good deals within the context of a peaking Perth property market.

3. I am sure that the other more experienced and more savvy investors will agree with my statement made here.

4. For your kind update, please.

5. Thank you.


regards,
Kenneth KOH

Ken you have said in the past that you are a fan of the Michael Yardney model. His approach is to build and hold though - are you saying you don't agree with this?

 

[Kennethkohsg]

Ken you have said in the past that you are a fan of the Michael Yardney model. His approach is to build and hold though - are you saying you don't agree with this?

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Dear Ausprop,

1. To each his/her own.

2. To hold, we must first be able to "afford" it.

3. Presently, we cannot "afford" to hold onto the various houses that we have built, as our other businesses have still not officially taken off.

4. Michael Yardney has other successful businesses, providing buyer agent services, property development consultancy services, property management, running property seminar etc and other income to be able to afford to hold on the various properties that he has developed.

5. When I am sufficiently "rich enough" and am able to comfortably hold on to every property that I develop, I will also like to do so, likewise in future.

6. We've tried holding onto it but apparently ATO expect us to sell as we have claimed the GST input tax credits, as advised by our tax accountants.

7. Morever, we are presently required to achieve an annual minimum business turnover of A$250,000 in order to qualify for our Australian Permnent Residency Status. Hence, the property development through a company structure and GST-registration and GST payment requirements.

8. For your kind update, please.

9. Thank you.

regards,
Kenneth KOH

 

[Kennethkohsg]

Hi Ken,

I am interested in the use of a Singapore company for payment of management fees.
Can you explain what the reason for this is ?
Is there any tax advantage ( eg...tax rates in Singapore are more favourable) in doing this, or maybe to generate some foreign income ?

I guess in the end, its all declared in Australia anyway for local taxation purposes?

Just curious...

kp

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Dear Kph,

1. GST amounts to only 5% in Singapore.

2. Thus, the required management consultancy services tend to be "cheaper" when provided from Singapore, all things being equal.

3. In Singapore, the Company tax rate on profits earned amounts to 22%. This is much lower when compared to 30% company profit tax rate in Australia.

4. For your kind update, please.

5. Thank you.

regards,
Kenneth KOH

 

[Kennethkohsg]

Dear All,

1. I write to inform you that together with a A$40,000 cash deposit, a $475,000 written cash offer has been received for the the house (200 m2? living space) at Lot 1753 (500 m2 land), which has just reached its Final Completion Stage this week.

2. The house belongs to one of my Singapore investors, who has yet to receive the market valuation report on their newly completed house.

3. Roughly, their basic investment costs will amount to
$116,000 (land) + $158,155 (house) = $274,155.

4. Thus, their potential gross profit = $475,000 - $274,155 = $200,345 over a 12 months period.

5. Assuming that their original investment capital used was A$60,000, which will actually provide them with an Return on Investment (ROI) of more than 300% pa
(A$200,155 / $60,000 = 333.59%).

6. |Consequently, I will personally recommend to the investor to accept the $475,000 cash offer and to cash out on their profits first before further re-investing again through another "buy-and-build" project.

7. What do members think and say?

8. For your further discussion, please.

9. Thank you.

regards,
Kenneth KOH

 

[Ausprop]

dont worry about the ATO - just tell them your plans have changed and return the inpuit tax credits... they are the ones that start this mess by working with 'intnetions' all the time, which rarely matches what eventuates.

sell vs hold:-

hold and refi at 80% of $475k = $380k less $274k = $106k non taxable cash in pocket plus an appreciating asset. net assets on balance sheet = $201k.

sell and collect $475k less $274k less GST $18k less say 25% tax if you are flicking some income offshore = $46k, cash left = $137k. net assets on balance sheet = $137k

so if it has been sold agent free there is slighlty more cash available if your friend sells, though he no longer holds an appreciating asset. if property goes up by the predicted 7 or 8% for the next few years that could be $100k over a few years, which is in addition to the $106k that you pulled out. You could go back and tap that equity again as rents rise (and thus support your servicability). and if he could get a val for $500k there is really not much between the two options on a cash out basis.

 

[Kennethkohsg]

dont worry about the ATO - just tell them your plans have changed and return the inpuit tax credits... they are the ones that start this mess by working with 'intnetions' all the time, which rarely matches what eventuates.

.

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Dear Ausprop,

1. Thanks for your kind words.

2. We're at that stage of submitting our applications for the Australian Permenant Residency Status at the end of this year that we prefer not to take that risk with ATO or/and to have ATO quering us regarding the change in our intentions or/and casting doubts about our own personal integrity nor on our own character regarding our own actions in Australia, such that we will risk our suitability for immigration into Australia.

3. This is as per advised by our tax accountants.

4. Consequently, we will have to re-build our own private property portfolio accordingly, with focussed emphasis on developing our property development related business into a full time business operations for ourselves.

5. For your kind update, please.

6. Thank you.


regards,
Kenneth KOH

 

[Kennethkohsg]

sell vs hold:-

hold and refi at 80% of $475k = $380k less $274k = $106k non taxable cash in pocket plus an appreciating asset. net assets on balance sheet = $201k.

sell and collect $475k less $274k less GST $18k less say 25% tax if you are flicking some income offshore = $46k, cash left = $137k. net assets on balance sheet = $137k

so if it has been sold agent free there is slighlty more cash available if your friend sells, though he no longer holds an appreciating asset. if property goes up by the predicted 7 or 8% for the next few years that could be $100k over a few years, which is in addition to the $106k that you pulled out. You could go back and tap that equity again as rents rise (and thus support your servicability). and if he could get a val for $500k there is really not much between the two options on a cash out basis.

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Dear Ausprop,

1. I agree with your line of thinking.

2. If this is my own investments, I would have held onto the same appreciating property as you have suggested.

3. It will make more investment sense adopting this strategy as we are familiar with the Perth property market and its cyclical property trends.

4. As for my investor in Singapore, because of their present lack of in-depth edcuation regarding the Australian property markets/trends in general, given their own different experiences in property investing in Singapore and Malaysia where the market correction can be as severe as 40% during their cyclical downturns trends too, my own present thinking is that it is important for them to have a positive and profitable experience in their property investment in Australia, for themselves first and realise their profits/ROI returns in cash form.

5. This is because they have previously invested their monies on the basis on my honest character and my own limited successful property investing track record to date.

6. Thus, even as I "hand-held" them into this property investing successfully, they have to believe in themselves and in the Australian property markets that they too, are able to invest and profit from these market for/by themselves.

7. Hopefully, their first positive and profitable experience and huge cash ROI returns will also provide them with the sufficient motivation to educate themselves more in-depth regarding their own property investing in Australia and be willing to proceed to the next level of accumulating their own Australian property portfolio for themselves. This is what I have intended and planned for them regarding their own self-education in property investing in Australia.

8. Hopefully too, they are able to better trust me and my assessments on the Australian property market in future, as they start to make more profit from their own property investments in Australia and start to build their own property portfolio for themselves, through my related companies in Singapore and Australia.

9. For your kind update, please.

10. Thank you.


regards,
Kenneth KOH

 

[kph]

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1. GST amounts to only 5% in Singapore.

2. Thus, the required management consultancy services tend to be "cheaper" when provided from Singapore, all things being equal.

3. In Singapore, the Company tax rate on profits earned amounts to 22%. This is much lower when compared to 30% company profit tax rate in Australia.
regards,
Kenneth KOH

Ken,
Are you in Perth full time these days or still in Singapore. ?
Can you advise what the advantage is between GST in Singapore at 5% vs GST in Aus at 10%. I mean, how do you avoid paying gst in Aus in the first place ?

Also, even if tax rates in Singapore are 22% vs 30% in Aus, don't you still have to declare the Singapore income and pay the tax difference, or does it stay in the company and thus is not declared in Aus ?

Still curious..

Kevin

 

[Kennethkohsg]

Dear Kevin,

1. If you are referring to actual "tax avoidance", it is "illegal", to the best of our knowledge and as advised/confirmed by our tax accountants. Therefore we do not do it at all.

2. However, if you are referring to some form of tax minimisation, yes we do it to a certain extent where applicable, so as to properly reflect the actual transactions, as advised by our tax accountants.

3. This is because our various Companies in Australia and Singapore do work in conjunction with one another, in providing some of the services to our clients.

4. Consequently, some times part of the profits earned in Australia were paid to our Singapore company for certain services and vice versa by way of these inter-company service payments.

5. Hence, the profits in Australia can be reduced accordingly while the profit in Singapore is increased correspondingly, so as take advantage of the different company tax rate in these 2 countries. In this way, the total tax payable by us as a whole, is minimised as a result.

6. For your kind update, please.

7. Thank you.

regards,
Kenneth KOH

 

[Kennethkohsg]

Ken,
Are you in Perth full time these days or still in Singapore. ?

Kevin

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Dear Kevin,

1. Yes, I do see myself as being stationed in Perth more or less on a full-time basis. My official office is now located in Perth.

2. However, I am now physically back in Singapore.

3. I last flown back to Singapore from Perth on 15th July 2006, having stayed for the last 62 days since 15th May 2006.

4. I have also been "tax-resident" in Australia for the last few years having spent more than 185 days each year staying in various parts of Western Australia/Australia during each 12 months period per calendar/financial year respectively.

5. I am next due to return to Perth again on 15th August 2006.

6. For your kind update, please.

7. Thank you.

regards,
Kenneth KOH

 

[kph]

Thanks for the info Ken.
Reason for the curiosity was that as a coincidence, I have recently been discussing with some parties the option of using a Singapore registered company or a NZ registered company ( ie...an offshore company ) to handle project management fees.
The purpose of which, is to generate foreign income.( not avoid tax in Aus )

I must catch up with you next time you are in Perth...to discuss further.

Thanks
Kevin

 

[Kennethkohsg]

Thanks for the info Ken.
Reason for the curiosity was that as a coincidence, I have recently been discussing with some parties the option of using a Singapore registered company or a NZ registered company ( ie...an offshore company ) to handle project management fees.
The purpose of which, is to generate foreign income.( not avoid tax in Aus )

I must catch up with you next time you are in Perth...to discuss further.

Thanks
Kevin

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Dear Kevin,

1. Yes, we are doing just that, in our own service provisions to our investors from Singapore too.

2. For your kind update, please.

3. Thank you.

regards,
Kenneth KOH

 

[TheAnalyst]

My honest comment : using overseas company -- most likely their own company -- at a higher management rate. Actually, this overseas company does nothing about from his own paperwork. They may not pay any tax to either Aus gov or overseas gov. You do not expect ATO to ring overseas to check whether they have paid or not.

Simple Yeh --- reduce profit part -- less tax.

KPH you'd better rigister a company in an island (called tax heaven), then you do not pay any tax.

 

[Kennethkohsg]

My honest comment : using overseas company -- most likely their own company -- at a higher management rate. Actually, this overseas company does nothing about from his own paperwork. They may not pay any tax to either Aus gov or overseas gov. You do not expect ATO to ring overseas to check whether they have paid or not.

Simple Yeh --- reduce profit part -- less tax.

KPH you'd better rigister a company in an island (called tax heaven), then you do not pay any tax.

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Dear Analyst,

1. I think that you have under-estimated ATO's resolve to properly enforce their tax collection as due, on the Australian public behalf.

2. Our Singapore associates do have to do their own promotion programmes in Singapore and arrange/accompany their clients to Australia for their site visits and ground education, in conjunction with our associates in Perth.

3. Neither do I think it is wise of you to ask KPH to register his company in one of an overseas tax heaven countries as ATO is presently checking into such kind of related operations.

4. For your kind update, please.

5. Thank you.

regards,
Kenneth KOH

 

[TheAnalyst]

Only you know your own argument I believe. It is so simple to understand while you try to argue in your way. I do not have any problems in these things but just try to be honest. I believe you know, <KPH> know, I know what the purpose is.

 

[Kennethkohsg]

Dear Analyst,

1. The line between tax minimisation and tax avoidance is a "thin" one. If you have read up on the ATO case rulings, you will know what I mean.

2. Better still, please go ask your own duly qualified tax accountant yourself, if you are unclear about such matters.

3. As far as I know, tax minimisation is legal and is everybody's legal right according to the ATO Charter but tax avoidance is "illegal" and one risks fined heavily when caught.

4. What you have suggested for KPH has been ruled by ATO as "illegal" and ATO is known to be actively cracking on such cases presently.

5. Please go and verify what I said here, with your own tax accountants if what I say here, is indeed accurate and true, please.

6. Thank you.

regards,
Kenneth KOH

 

[kph]

Oooooohh...I missed all that..

No, I am not trying to pay 'no tax' or even trying to minimise tax.
What I am in the process of doing is to generate foreign income..

We are looking into either NZ or Singers as to which country is more convenient to domicile the company.

I am leaning towards Singapore but more homework needed before we make a decision.

It was hinted at before, by my favourite forum accoountant..
"If we all focused more on making a profit and less on minimising tax, we would probably find that we are better off !!"
(or words to that effect...)

Makes sense to me and hereby dubbed "The Profit Motive".

Kevin..

 

[AUSPROP.]

ok I gotta ask - and kph you dont have to answer - why would you want to generate foreign income? tax motivation, overseas holidays, asset protection? I am wondering if there is a slant on things that I should be into!

 

[kph]

Nah, non, niet....sorry none of the above.

Foreign income to access foreign borrowings.

Although..there may also be a tax advantages, but this is not the primary reason.

And in addition, many of these countries offer tax breaks and incentives to open up a business in their country, especially if it is an export business.

Business tax rates can be down around 10% or even zero..
Thats phase two, down the track.

Anyway Aus, what happened to your posts ???
Did you change nick or ...something along the line of 'the artist formerly known as ......'

But this is getting way off the topic.
Where is Kenneth to discuss more about Rockingham ??

kp