"In terms of entities to acquire a property, I think it is relatively simple.
"If a property is going to run at a tax loss for a few years, then I am in favour of a loss attributing qualifying company (LAQC).
"The benefit of this is that it is easy to transfer shares between shareholders without causing depreciation recovered or any problems.
"Let's assume that we have two young professionals earning over $38,000 each. They decide to buy a rental property between them and own the shares 50/50. In a couple of years' time, one of them stops work to have their first child.
"At that time the shares can be transferred to the spouse that remains working. All the tax loss from that point on will flow to the spouse holding 100 per cent of the shares. If the property had been owned as a partnership, then the loss would continue to pass out 50/50 to each spouse, even when one of them stops working.
Unless a Matrimonial Property Agreement was entered into - yet another visit to the lawyer - there would be no simple way of transferring the property between the two without legal conveyancing costs or potentially adverse depreciation recovered as a tax consequence.
"When, in the future, the property stops making a loss, the shares can simply be transferred to a family trust and the company can cease to be a loss attributing qualifying company.
Capital gains therefore accrue outside of the individuals' names and the profits can either be used to repay debt or ultimately to pay dividends to the trust.
"Alternatively, a further rental property could be acquired at that time with the company either continuing to a loss attributing qualifying company or again the shares transferred to the trust and the company ceasing to be an LAQC.
"Where a property is going to make a profit from day one, then it is better to put it directly into a family trust. ... "
[Source: http://www.nzherald.co.nz/business/...tion=commproperty&thesecondsubsection=general ]
Trusts
Trusts are a common investment and credit protection vehicle in New Zealand.
A trust will generally be regarded as being resident in New Zealand for taxation purposes if the settlor, or deemed settlor under specific rules, is resident in New Zealand.
There are also special rules dealing with the receipt of both beneficiary income and capital distributions by New Zealand resident beneficiaries from foreign trusts.
Persons considering moving to New Zealand either temporarily or permanently should take specific advice in relation to the structuring of existing foreign trusts prior to becoming New Zealand tax residents.
New Zealand is also a tax haven in terms of offshore trusts. It is possible to structure a trust with a non-resident settlor and New Zealand tax resident trustees which is subject to tax in New Zealand only on income sourced from New Zealand. Thus, New Zealand can operate in effect like a tax haven for trusts.
[Source: http://www.nsa.co.nz/articles.htm#Distributions to Minor Beneficiaries ]
"If a property is going to run at a tax loss for a few years, then I am in favour of a loss attributing qualifying company (LAQC).
"The benefit of this is that it is easy to transfer shares between shareholders without causing depreciation recovered or any problems.
"Let's assume that we have two young professionals earning over $38,000 each. They decide to buy a rental property between them and own the shares 50/50. In a couple of years' time, one of them stops work to have their first child.
"At that time the shares can be transferred to the spouse that remains working. All the tax loss from that point on will flow to the spouse holding 100 per cent of the shares. If the property had been owned as a partnership, then the loss would continue to pass out 50/50 to each spouse, even when one of them stops working.
Unless a Matrimonial Property Agreement was entered into - yet another visit to the lawyer - there would be no simple way of transferring the property between the two without legal conveyancing costs or potentially adverse depreciation recovered as a tax consequence.
"When, in the future, the property stops making a loss, the shares can simply be transferred to a family trust and the company can cease to be a loss attributing qualifying company.
Capital gains therefore accrue outside of the individuals' names and the profits can either be used to repay debt or ultimately to pay dividends to the trust.
"Alternatively, a further rental property could be acquired at that time with the company either continuing to a loss attributing qualifying company or again the shares transferred to the trust and the company ceasing to be an LAQC.
"Where a property is going to make a profit from day one, then it is better to put it directly into a family trust. ... "
[Source: http://www.nzherald.co.nz/business/...tion=commproperty&thesecondsubsection=general ]
Trusts
Trusts are a common investment and credit protection vehicle in New Zealand.
A trust will generally be regarded as being resident in New Zealand for taxation purposes if the settlor, or deemed settlor under specific rules, is resident in New Zealand.
There are also special rules dealing with the receipt of both beneficiary income and capital distributions by New Zealand resident beneficiaries from foreign trusts.
Persons considering moving to New Zealand either temporarily or permanently should take specific advice in relation to the structuring of existing foreign trusts prior to becoming New Zealand tax residents.
New Zealand is also a tax haven in terms of offshore trusts. It is possible to structure a trust with a non-resident settlor and New Zealand tax resident trustees which is subject to tax in New Zealand only on income sourced from New Zealand. Thus, New Zealand can operate in effect like a tax haven for trusts.
[Source: http://www.nsa.co.nz/articles.htm#Distributions to Minor Beneficiaries ]
