Forum Replies Created
terry
sorry Terry he is so busy giving out tax advice don’t know if he can take on any legal work at the moment.
Agreed Scott. Probably even better if he can find some bum to do the documents for free.
Refer to BRMJCQ case, Cooper case and Skiba case as these demostrate that providing services through a contracting company generally result in failing to qualify as a PSB.
sml
consider whether issuing shares may be more tax effective than transferring shares and the impact of the general value shifting provisions on your decisions.
Have you taken into account any capital allowances claimed on the property in working out your capital gain ?
Is the property held as tenants in common ?
Dan42 wrote:You can claim back the GST IF:1) You are registered for GST
2) You are running a property development business.This can be in your own name, it does not have to be under a company structure.
The downside of claiming the GST when you are building is that you would be required to PAY GST when you sell, reducing your profits.
If you are building for your own use, or to rent out the property, then you can not claim the GST on building.
Unless the developer has used the margin scheme and in which case you cannot claim back the GST.
If your intention is to purchase and improve these assets with the intention of ‘flipping’ them then capital gains tax will not be applicable as the profits will be assessed on revenue account not on capital account. This means that things like the 50% general CGT discount are not applicable as the profit is not assessed on capital account.
Also need to be careful re ‘substantial improvements’ to the property and whether GST will apply to the sale of the property if ‘substantial improvements’ have been made.
Net Profits would be added to your taxable income and you would be taxed at the appropriate tax rate.
Ok so business turnover is $5k per week meaning an annual turnover of $260,000. Now the real question is what is the net profit (after accounting for a reasonable owner’s salary say $40-$50k). If this equates to about $40k per annum (after the owner’s salary of $40-$50k) then the pricing is about right as multiples of net profit of between 2 to 2.5 is fairly reasonable. I would be aiming for a multiple of about 2 for this type of business.
Working hours 4-8pm are very good. Need to look at the fixed (rent, rates, etc) and variable costs (staff wages, electricity, etc) to see whether there is a decent net profit.
Errol a million dollar turnover business for sale for $90k ? Can I ask why ? That seems quite cheap (cheap as chips :-p) or are you not making a profit or working horrendous hours and paying for it. With that sort of turnover I would think you could put in a full time manager and still make a decent crust.
Marky
We charge $990 (including GST) for a land tax unit trust if the property is located in NSW. Be careful of the online ones as our provider has found some fundamental errors in many of them including some unit trusts which had merger issues (eeek !!) and one which claimed to be able to obtain the NSW land tax exemption and failed.
Let me know if we can help. You will need a trustee. Would generally recommend a company as trustee. We can set this up for $990 including GST or you can set that up yourself online if you know what you are doing which is always cheaper.
Yes you can negatively gear with a unit trust. The trust will not be negatively geared but rather the gearing occurs at the unit holder level. The depreciation benefits will be at the trust level as it will hold the property and the interest deductions will be at the unit holding level. The loan will be taken out to purchase units in the unit trust.
For example (these are just examples not related to anything but to illustrate the concept)
Unit Trust
Rent $30k
Depreciation $10k
Other Expenses $5kNet Rent $15k
Unit Holder
Net Rent $15k
Interest on Loan $20k
Loss $5k claimed on individual’s tax returnI think Richard from Queensland deals with these structures quite often so hopefully he will reply re current market for obtaining loans for this type of structure.
riti
if looking at changing ownership interests then a unit trust may be a more effective structure. The advantage of a unit trust over individual holdings is that the stamp duty on transfer is not at ad valoreum rates (unless the land rich tax provisions apply) and so you could end up saving a significant amount in stamp duty on transfer.
The formula would need to take into account a number of variables
1. Structure. Company no CGT discount. Other structures get the 50% cgt discount.
2. If asset held for less than 12 months then no discount otherwise consider structures and whether discount applies.
3. Calculating cost base. What to include what not to include.
4. Calculating reduced cost base. Make sure capital allowance deductions are used to reduce cost base.
5. Small business CGT concessions. How these are built into the formula. Can be applicable for various types of property investments as the small business CGT concessions can and do apply (in particular circumstances)Agree richard missed the bit were he said that there was an amount of 100k outstanding. That portion will become deductible.
Are you saying that you will use the $210k to purchase a property which will become your principal place of residence and then you will rent out your existing home ?
If the answer is yes then the interest on the $210k will not be deductible as the purpose for which the funds were put was to purchase your new principal of residence for which the interest is not deductible.
You could borrow the $210k to buy the new property and rent it out to someone else and then the interest would be deductible as it is your new investment property. However converting your existing residence into the investment property will mean none of the interest is deductible.
A few things to consider
1. Losses in a discretionary trust will be “trapped”. i.e. they can’t be distributed to the beneficiaries but need to be carried forward to be offset against future income. This can present some cashflow issues.
2. Distributing from a trust to a corporate beneficiary. You will need to physically make the distribution (i.e. the distribution of profit will need to equal the distribution of cash to the corporate beneficiary) otherwise you will need to deal with Division 7a issues. If the physical cash is distributed to the corporate beneficiary and you have a discretionary trust as the shareholder you may decide to retain and invest the funds in the corporate beneficiary and pay out franked dividends to the discretionary trust and then from the trust to the beneficiaries to maximise your tax planning opportunities.
3. If the trust or trusts are sued and the assets of the trust(s) are insufficient to meet it’s obligations then having an individual as trustee will mean the individual may have to make up the shortfall. With a company the company as trustee has the same rights but if it is an “empty shell” then this is minimised.
4. Have you discussed foreign hybrids and Controlled Foreign Companies (CFC) issues with your adviser ?YoungInvestor
Recently posted an article discussing this type of scenario
http://www.omegapartners.com.au/2010/12/capital-gains-tax-renting-the-family-home/
Mike is correct. The broker (and the person giving him the advice is wrong).
Refer them to http://www.ato.gov.au/rba/content.asp?doc=/RBA/Content/89363.htm
“Legal interest is determined by the legal title to the property. Where an investment asset is held in the name of one person only and the loan used to purchase the investment asset is held in joint names, only the legal owner can claim the full amount of the interest paid. In these circumstances we accept that the other person has on-lent his/her half of the funds to the legal owner and the legal owner is ultimately liable for and has incurred the entire interest expense. This is the case even if this arrangement is not formalised in a written loan agreement between the two parties.”
Ask them in writing to explain why their opinion differs from that of the ATO.
