I'm in the process of buying a property. In this article I wish to share what I learn along the way! And I'll be adding to it as I find more interesting information to share.
Ownership structures:
Key Types of ownership
- Privately Owned / Joint Ownership
- Partnerships
- Companies: Limited Liability Company / LAQC /LTC
- Trust
Privately Owned / Joint Ownership: To privately own or jointly own your rental property means you have purchased it and own it in your own name(s). All rents received and expenses are declared in the personal tax returns of the owner(s). There's no "official" setup or registration required.
Partnerships: A Partnership can have two or more members and requires a registration with Inland Revenue and has its own IRD number. It also requires its own income tax return to be prepared each year as well as the various partner's returns.
Companies
Limited Liability Company: This is usually used by GST registered commercial property owners or property developers. The problem with this option is that you cannot simply sell the property and realize the capital, you need to liquidate the company in order to do this otherwise the money paid to the owners would be deemed as dividends and would be taxed.
LAQC (Loss Attributing Qualifying Company): This was a popular vehicle for rental investment property ownership as it allowed shareholders to offset the companies’ losses against their personal income but tax changes removed these an option from 1 April 2011 onwards.
LTC (Look Through Company): This replaced LAQC’s and is a good structure for negatively geared investment properties. LTC companies are fiscally transparent so from IRD’s point of view everything including income, expenses, tax credits, rebates, gains and losses are passed on to its shareholders.
Trusts
Trusts are a good option for people wanting to protect their family home or investment properties while at the same time retaining control of these assets. However they have limited tax benefits relating to using losses to a personal advantage against other income.
It's is reasonably common for rental property to be in a Trust especially where the owners want good long term asset protection however it really depends on what you're after. Want assets protected well? Go for a trust. Looking for tax benefits? Another structure would be more effective and cost less. If you do want to own property in a Trust you'll need it set up by a good lawyer who specialises in doing this.
Sources: anz.co.nz, kiwitax.co.nz , propertypanel.co.nz, The Locals Newsletter
Key Types of ownership
- Privately Owned / Joint Ownership
- Partnerships
- Companies: Limited Liability Company / LAQC /LTC
- Trust
Privately Owned / Joint Ownership: To privately own or jointly own your rental property means you have purchased it and own it in your own name(s). All rents received and expenses are declared in the personal tax returns of the owner(s). There's no "official" setup or registration required.
Partnerships: A Partnership can have two or more members and requires a registration with Inland Revenue and has its own IRD number. It also requires its own income tax return to be prepared each year as well as the various partner's returns.
Companies
Limited Liability Company: This is usually used by GST registered commercial property owners or property developers. The problem with this option is that you cannot simply sell the property and realize the capital, you need to liquidate the company in order to do this otherwise the money paid to the owners would be deemed as dividends and would be taxed.
LAQC (Loss Attributing Qualifying Company): This was a popular vehicle for rental investment property ownership as it allowed shareholders to offset the companies’ losses against their personal income but tax changes removed these an option from 1 April 2011 onwards.
LTC (Look Through Company): This replaced LAQC’s and is a good structure for negatively geared investment properties. LTC companies are fiscally transparent so from IRD’s point of view everything including income, expenses, tax credits, rebates, gains and losses are passed on to its shareholders.
Trusts
Trusts are a good option for people wanting to protect their family home or investment properties while at the same time retaining control of these assets. However they have limited tax benefits relating to using losses to a personal advantage against other income.
It's is reasonably common for rental property to be in a Trust especially where the owners want good long term asset protection however it really depends on what you're after. Want assets protected well? Go for a trust. Looking for tax benefits? Another structure would be more effective and cost less. If you do want to own property in a Trust you'll need it set up by a good lawyer who specialises in doing this.
Sources: anz.co.nz, kiwitax.co.nz , propertypanel.co.nz, The Locals Newsletter
Handy Hints:
Gardening:
Gardening:
- Fend off weeds