We are planning to renovate and extend our family home (about 400’000 worth). What are the implications and costs if we decide to sell the property to our company beforehand. The company is doing well and the profits could be used to renovate rather than having to be paid out as salaries to us (at a high tax rate)first before being used to renovate. Our company is very stable and we intend to keep living in the property for a long time and maybe rent it out to a third party 10 years down the track. Appreciate the advice.
Is the family home worth 400k or is it the cost of the renovation?
The company will have to pay stamp duty when it buys it. The amount depends in which state you are located.
superAndrew | Property Analyser and Finder Tool
https://property-analyser.com.auhi there
the family home is worth about 1mill and the 400k is the cost of the renovation
In QLD the company will have to pay $32,000 in stamp duty when purchasing the property.
When you will sell the property to the company you won’t have to pay CGT since it is your PPOR. However when the company owns it, it will have to pay CGT at 30% if you decide to sell it in the future.
Other issues to take into consideration will be legal. The property will be a company asset and therefore should the company get sued, a third party could have a claim on it.
These were just off the top of my head. There will be other things to take into consideration so it would be better to consult with an accountant.
superAndrew | Property Analyser and Finder Tool
https://property-analyser.com.auYes many issues as Andrew points out.
If it is a trading company this is dangerous.
Stamp duty at market rates.
Who owns the shares? and asset protection.
Land tax – possibly not exempt.
No 50% CGT discount.
Will you be paying market rent?
Possible FBT issues.
Paying for renovations won’t mean a full deduction as this will be a capital expense.
etc
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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