Taxi business

[ourhouse]

Hi all,
I have a full time job and earning around 100K+ and currently paying a lot of tax as I have no investment. I am planning to buy a taxi plate so analysing first, if it will be any useful.

I am planning to start this business with a partner who is a taxi driver and who will be contributing a share to the purchase price of the plate ($420K+). I have few questions in this regard

1. Is it best for us to start a company first, so that we can avoid GST and have a partnership defined, so that both of our share in the company is clear.

2. I need to take personal loan, will having company (from 1) be a problem for the loan Vs sole properitor.

3. What institutions shall we approach for this loan, we dont own any property, just around 150K+ cash and my fulltime job, will it be feasible to secure a loan for 270K+.

4. Can I claim tax benefits from my full time job (100K+) against the expenses incurred in my taxi company.

 

[Aaron_C]

1. Is it best for us to start a company first, so that we can avoid GST and have a partnership defined, so that both of our share in the company is clear.

2. I need to take personal loan, will having company (from 1) be a problem for the loan Vs sole properitor.

3. What institutions shall we approach for this loan, we dont own any property, just around 150K+ cash and my fulltime job, will it be feasible to secure a loan for 270K+.

4. Can I claim tax benefits from my full time job (100K+) against the expenses incurred in my taxi company.

1. How would a company make you avoid GST? If your revenue exceeds $75,000 (which it should), then you have to register for GST regardless of whether you like it or not. In any case, a company would be a good thing to do, perhaps a unit trust since it is a business partnership.
2. No it's not a problem, you will give a guarantee anyway.
3. There are specific finance companies that deal with taxi licence finance.
4. Not if you run the tax business through a company/trust entity but you may be able to claim some interest deductions if you structure it properly.

 

[Terry_w]

You would probably want to look at using a discretionary trust since this will provide a flexible income distribution ability. Probably good for a unit trust with each person owning the units via their own DT.

 

[Player]

Hi all,
I have a full time job and earning around 100K+ and currently paying a lot of tax as I have no investment. I am planning to buy a taxi plate so analysing first, if it will be any useful.

I am planning to start this business with a partner who is a taxi driver and who will be contributing a share to the purchase price of the plate ($420K+). I have few questions in this regard

1. Is it best for us to start a company first, so that we can avoid GST and have a partnership defined, so that both of our share in the company is clear.

2. I need to take personal loan, will having company (from 1) be a problem for the loan Vs sole properitor.

3. What institutions shall we approach for this loan, we dont own any property, just around 150K+ cash and my fulltime job, will it be feasible to secure a loan for 270K+.

4. Can I claim tax benefits from my full time job (100K+) against the expenses incurred in my taxi company.

5. Will the Victorian Govt dilute the stock by releasing further plates thereby rendering the value of the taxi plate less than what was initially paid?

 

[Shaneelastic]

5. Will the Victorian Govt dilute the stock by releasing further plates thereby rendering the value of the taxi plate less than what was initially paid?

hold on a sec there brother...i wouldnt be buying a taxi business now....just wait and apply for the 20K license in a couple of months

 

[coastymike]

If your revenue exceeds $75,000 (which it should), then you have to register for GST regardless of whether you like it or not

Taxi businesses are required to register for GST regardless of turnover.

http://www.ato.gov.au/businesses/content.aspx?doc=/content/20724.htm&page=5

 

[Ace in the Hole]

I am planning to start this business with a partner who is a taxi driver and who will be contributing a share to the purchase price of the plate ($420K+)

This is the part which worries me the most.

 

[Terry_w]

This is the part which worries me the most.

The fact that he is a taxi driver? Or that he will be contributing a share?

 

[Ace in the Hole]

The fact that he is a taxi driver? Or that he will be contributing a share?

All the above + the rest, just from that one line.

Partnership, with possibly known acquaintence
Taxi Driver, likely to drive under the license
Possibly not an equal contribution
Purchase price of $420k+

Could work out, but it seems a high risk to reward ratio.
And it seems the main reason is to reduce taxable income, so how will that work if it's a good business/investment?

 

[Terry_w]

Def entering into a partnership is risky, but I think properly structuring it will minimise these sorts of risk so the main issue will be can it make money.

e.g a corporate trustee for a unit trust with the units holdings worked out using a formula for who does what and who contributes how much.

 

[moyjos]

Business + partner + friend = heartache

Should be an indisputable law taught at birth. Just waaaaay to many variables and something has to give .... Often it is the spouse of one (or both) partners just starts the niggling doubt "you contribute so much more than they do"

There are much easier ways to invest your money and get tax benefits.

 

[Terry_w]

4. Can I claim tax benefits from my full time job (100K+) against the expenses incurred in my taxi company.

Others raise an interesting point. Are you wanting to run this at a loss?

A company is a separate legal person so a loss from the company cannot offset a personal income nor can personal expenses be offset against company profit.

 

[Truly Exotic]

5. Will the Victorian Govt dilute the stock by releasing further plates thereby rendering the value of the taxi plate less than what was initially paid?

dont even worry about anything else except this!

whats the point of getting a $50k tax deduction if your asset is has gone from $420k to $200k!

there is lots of protests and debacles about privatising, diluting, limiting plate numbers and conditions etc.

 

[M.Investigator]

I agree and I think this is a very risky venture, largely because of the industry itself, and the potential risk/reward ratio. I think there's too much of a high risk of losing money, and I hate losing money.

Now, I'm more of a positive geared property investor, but in this situation where one of your main goals is tax deductions, then I would rather invest in negative geared properties than put my money in that particular business.

Nonetheless, that's just my personal opinion. There may be other factors that you may know of that I don't.

 

[schebib]

High risk with no great return

I would also be worried particularly with point 5. Dads a taxi driver, been one for 35 years. Sold his plate couple years ago. He now rents one paying full fee (approx 38k pa) and has another that he scored at dirt cheap prices when the hybrid cars came out ($1.2k pa x 10 yrs) and the gov was giving them out couple years ago. Up until 6 month ago he never complained about the industry. Bussiness is very quiete in Vic with talk of many changes to come as they attempt to restructure.

I would avoid taxi business all together for the next year or two. If you still thinking of purchasing, the only bank that would use the taxi plate as security that I know off is Arab bank.

http://www.arabbank.com.au/business-banking/loans-for-business/taxi-loans

 

[ourhouse]

Thank you all for the overwhelming response to my thread. Given the timing and structure of this, it does seem a risky decision at the moment. I need to consider your suggestions, so will come back.. Cheers

 

[wobbycarly]

Thank you all for the overwhelming response to my thread. Given the timing and structure of this, it does seem a risky decision at the moment. I need to consider your suggestions, so will come back.. Cheers

In the end, though, it's your decision. All the well-meaning advice from the people here don't consider your own circumstances. However, hopefully this has helped you by identifying more questions you need to ask, or where to perform further research, and then help you make a better-informed decision.

Good luck - let us know what happens.