Hello fellas
just a quick one – I am new to this area, and currently have an new IP.
I would like to know if an ABN can help is creating better tax shelter? or in other words, does working under an ABN give better tax relief?if I get an ABN, and get my rent in that name, do I open a bank account in the ABN name?
cheers
DHi D
I think you are getting yourself confused.
ABN stand for Australian Business Number and if you are in the process of carrying out a business are required to register for one when your turnover > 75K. You are still able to register voluntarily where your T/O is less than $75K.
Holding an ABN has no bearing on how you will hold a IP.
The ABN will relate to the entity on which you register it under i.e Business name / Partnership / Pty Ltd Company / Trust etc .
What you would do is consider the entity you intend to use to acquire your IP's and then look at registering the entity for an ABN.
Richard Taylor | Australia's leading private lender
Hi,
if you look at a trust to place your IP in you can reduce your tax to 30per cent – well if I am correctly interpreting what my accountant said to me. You can allocate funds to people or entities in your trust. Entities may be a business. What you are trying to do is avoid capital gains tax when you decide to eventually sell the property which would be 46.5% after the cost base is deducted from your sale price. If you sell after 12 months you can receive 50% deduction in capital gains unless youa re claiming the home as your primary residence – if you have rented it out at any stage it will reduce your ability to do this, proportioning then occurs. Within a trust it also protects your assets from loss, ie being sued or loosing it to a divorce etc. An accountant can fix it up for you for a bout $400 and you need to do it beore you buy your next property.I am just about to do it – I think it is a good idea for protecting your assets later on. Cheers A
Hi there
Regretfully your statement is incorrect if you look at a trust to place your IP in you can reduce your tax to 30per cent.
I think you may have been referring to a Pty Ltd Company where Tax is paid at 30 cents in the dollar initially and then each shareholder. The Pty Ltd Company would be the Corporate Trustee.
Certainly do not leave the funds in the Trust unallocated or the Trust will be Taxed at the highest marginal rate.
if you have rented it out at any stage it will reduce your ability to do this, proportioning then occurs – Again sorry to be picky but again this statement is incorrect.
All in all consult professional advice before you leap forward.
Richard Taylor | Australia's leading private lender
right,
got some of the idea – is this statement correct? – what you are referring to, Richard, is that the IP should be bought under an entity (say a Pte Ltd) and this entity is registered for ABN.
I am about to get an ABN and wanted to know the following;
1. can I claim deduction for the part of my 'home' that I use as office for my ABN ?
2. the current rent that I get is in my name, so do I have to put the rent in my ABN name ?
3. do I have to have a separate bank account for my ABN?also, I believed that the companies and trust get a flat rate of 30% as amancl said, along with the case of PR (primary residence) getting under the radar of CGT if being used as income generating .
what aspects are incorrect in this, Richard?
cheers
DHi DS
Yes the IP is purchased in whatever entity you intend to hold the security and that entity is registered for an ABN.
In answer to your questions:
1) Yes but i am not sure you would want to.
2) No but maybe reasons why you would want to dependant on 1) above.
3) Always makes life easier.Trust certainly do not pay Tax at a flat rate of 30% in fact if the funds are retained in the Trust at Y/E and not dustrubted they pay Tax at the highest marginal rate. In the old old days when the Super Surcharge existed then there was reasons why you would consider paying Tax at this rate but not now.
Richard Taylor | Australia's leading private lender
Here is my take on your situation.
You seem to misunderstand the nature of a business. Just getting an ABN really has no bearing on anything. Assuming you are just getting an ABN in your own name, then you will be a sole trader. Income and expenses just go on your personal tax return.
Whether you can claim things depends on the nature of your business. Just having an ABN will not allow you to claim part of your house. But if you are making money in your business and use the part of the home as an office, you may be able to claim a portion of things such as rent, electricity, gas etc you may also be able to claim office equipment and tim tams and even toilet paper.
But seek good advice as claiming part of your home may mean you will lose the CGT free status of your house – saving a few dollars now could mean huge CGT bills later.Rent will be income to the owner of the property. Having an ABN won't matter as either way it will be added to your own tax return.
There is no need for a separate bank account for a sole trader, but it may be better to keep business an personal separate.
BTW. discretionary trusts do not usually pay any income tax if the income is distributed. The beneficiaries are required to pay tax on their income and money received from the trust.
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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