Hi everyone
A friend of mine is a little confused as to what to do.
She has recently sold an investment property that was owned by a company where she was the sole director. She is now interested in buying another property that she will move into and use as her principal place of residence.The question is, can she use all the money that she got from the sale of the company owned investment property to do this? Is there tax implications if she does? and if she can’t use the money to buy a POR, what can she use the money for in the future?
Thanks for all your help!!
She needs to get legal advice.
The money doesn’t belong to her it belongs to the company so there are various legal and taxation consequences to using it, even if she doesn’t breach corporations law.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks Terry
Yes. She is getting advice but we just wanted to put it out to the forum as well.
Basically, it is hard to see the benefits of having had the property set up as a company with her as the sole director (her late partner left it to her that way) if she can’t actually use the money. She is retired and self funded and doesn’t want the bother of having another investment property at this stage of her life so is really confused as to what she can use the money for.Hi all
My friend just wanted to emphasise that the company is now non operating company and only included shares and investment property when it was in operation. Any ideas on how she, as the owner of the Company (and sole director), access the funds for use other than to purchase another investment property?thanks in advance for any advice you may have
If she is the shareholder the company could pay dividends and she could pay the extra tax, if any, and then buy in her own name.
The company could lend her money to buy, but then Div7A would apply and she would need to consider the interest rate and terms carefully.
The company could lend another company money to buy – but then if she lives in it Div7A would apply as well.
If she had loaned money to the company originally the company could repay this loan.
All the above have various consequences which need advice on.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
I’m in the exact same position “on the ladder”. Do you realize there is no 50% concession on the CGT when the property is owned by a Company? Hence check your CGT position for the sale of this property. My accountant told me that my Company can lend the money to me at an arms length agreement. Hence I will have to pay the Company fair interest on the loan for the life of the loan. He said the loan can be 25years or so. But I must pay my company interest every year. The Company will end up paying 30% tax each year on the interest income. Or, as my accountant says, just keep the property and borrow against it every 5yrs or so and that’s what I have done. This place goes up $100K every year that I have owned it so I just keep it. My lesson —–don’t buy in a Company name!
Thanks everyone. Great info from the forum as always.
Yes. We don’t know the benefit of buying in a company name either at this point. She is off to see the accountant tomorrow so hopefully he can give her some more info at what to do with it.cheers!
Normally you wouldn’t want to buy in a company name because of the tax rate. But there can be benefits especially in NSW as a company will get a separate land tax threshold. A company could also retain income so cap the tax at 30%, but this may be better done with a trust and a bucket company.
Keep in mind that franking credits are decreased by depreciation so this is another disadvantage.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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