Partner as Property Manager

[jacer4]

We have purchased an IP in Adelaide. My partner only works part-time and we plan for her to mange the IP which is owned 95% by myself and 5% by her.

She would set up asa Sole Trader (with ABN) and charge me the market rate for property management (and incur expenses) - net result will be additional income for her. (ie better going into her pocket as opposed to a PM company and the tax implications are still the same to me).

Anyone see an issue with this from the perspective of:

1. the ATO
2. liability/asset protection
3. legally


Thanks!

 

[wylie]

My husband pays me for managing his IPs. It is not just a paper transaction because I do everything that a PM would do. Accountant does my tax return at the end of the year. I don't think I earn enough to pay tax so I suppose I need a tax return only for record purposes.

Wylie

 

[Simon]

We have purchased an IP in Adelaide. My partner only works part-time and we plan for her to mange the IP which is owned 95% by myself and 5% by her.

She would set up asa Sole Trader (with ABN) and charge me the market rate for property management (and incur expenses) - net result will be additional income for her. (ie better going into her pocket as opposed to a PM company and the tax implications are still the same to me).

Anyone see an issue with this from the perspective of:

1. the ATO
2. liability/asset protection
3. legally


Thanks!

Is it really worth all that effort just for the little PM fee that one property might generate? I wouldn't bother and I manage 5 leases myself - do it because I enjoy it. The minute I don't I will pay someone else to do it for me.

Perhaps she could advertise her services and build up a proper rent roll? The training is available via TAFE and is pretty well an attendance based pass.

Cheers,

 

[Xenia]

There are many benefits to managing your own properties as a private landlord. However, setting it up as a business with an ABN and taking a commission for it breaches the land agents act. Fines of up to $20,000 apply for doing it without a license!

There are a few great property management companies in Adelaide you could look into

 

[Lofty]

Hi Jacer

Please check the following with your solicitor. As your partner is a 5% owner of the property, she has the right to manage the property.

I'd suggest you draw up a very simple Joint Venture Agreement (or Partnership Agreement, if your solicitor perfers) between yourselves, stating that you will pay your JV partner "x" to manage the property.

I hope this helps.

Cheers, Paul

 

[sailor]

I suspect the issue about needing a license relates to having a trust account into which PM's pay the rent, before distributing it to the landlords. Given that your rent is going straight into your bank account probably gets around this issue.

However, if you took PM on for other people, you would need a trust account.

What do you think Xenia?

 

[Xenia]

Sailor is correct, it relates to trust account issues, but also recieving a commission or pay for it.

SA has very tight and restrictive legislation concerning land agents (that's why I was forced to get a license to continue doing what I was doing).

Section 4 sates something like "a person is not able to recieve a commission or renumeration of any kind for transactions relating to a third party or to his or her own properties"

This clearly states that even JVs are out.
getting paid for managing your own properties are out!
even assigning contracts for which you are a principle in the transaction (as a bird dog) is illegal in SA.

You are allowed to manage your own properties as a private landlord and not recieve a pay for it!

 

[sailor]

You are allowed to manage your own properties as a private landlord and not recieve a pay for it!

Xenia what about if you as a person (entity A) get paid for managing a property owned by your SMSF (entity B) or even owned by one of your trusts (entity C)?