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Rich Dad Poor Dad and Corporations in NZ to Buy TOYS

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  • Rich Dad Poor Dad and Corporations in NZ to Buy TOYS

    Hello,

    Has anyone read any of the 'Rich Dad Poor Dad' books where he talks about using corporations in his ownership structure? He talks about the order in which people earn, spend and pay tax: i.e.

    POOR PEOPLE: earning a salary > then pay tax on the salary > THEN spending what's left over on toys etc, whereas:

    THE RICH: earn income (from investments/business usually) into a corporation > spend some of it on toys (via the corporation) > AND THEN FINALLY pay tax on what's leftover.

    A great system if you ask me; and sort of what we can do in NZ with things like: using your car for inspections, purchasing office equipment, employing your kids to mow lawns, having some of your home expenses claimed as a business. As long as it's used to earn an income.

    But my question is this: Can corporations be used in NZ to purchase 'proper' toys like cars, boats, light plane etc. (In the book, he talks about the corporation buying assets for the benefit of the employees?). Obviously, a property investor doesn't need a boat, car or light plane outright. But maybe a property investor could use his plane or flash new car to search and inspect properties right? I assume we can claim part expenses for this anyway, but what about 100% purchase of a car, or a boat into the corporation?

    Is a corporation (as talked about in the book) the same thing as a company (LAQC if involved in property) as we refer to in NZ? And how could this be structured in NZ...legally.

    I'm not after anything dodgy of course, nor structuring my affairs purely to avoid tax (illegal anyway) but a legitimate means of increasing my wealth.

    For anyone interested, the book is called 'Cashflow Quadrant' part of the purple 'Rich Dad Poor Dad' series of books - I highly recommend it (probably a taxable expense too).

    Thanks,

    Chief Wigum (stupid name I know but it keeps me anomonous)

  • #2
    But my question is this: Can corporations be used in NZ to purchase 'proper' toys like cars, boats, light plane etc. (In the book, he talks about the corporation buying assets for the benefit of the employees?). Obviously, a property investor doesn't need a boat, car or light plane outright. But maybe a property investor could use his plane or flash new car to search and inspect properties right? I assume we can claim part expenses for this anyway, but what about 100% purchase of a car, or a boat into the corporation?
    Hi Chief Wigum, I am no expert in structures etc, so get proper advice first before doing anything.
    As far as I am aware, we don't have the S or C corporations they use in the US here in NZ, just companies and trusts for our structures. I know companies can purchase vehicles and I guess it would be no different for trusts. I use 2 property companies and a trust (soon to be 2 trusts) for the properties I have. The most established of the two companies has purchased a 2000 Toyota Prado, a 2002 Porsche 911 turbo and a 1996 Ferrari 355B, all of which are owned by the property company. GST was claimed on all of these vehicles with no problems, an IRD inspector was even here doing an audit 6 months ago and was fine with it (he wasn't actually here to check on that though). I ran a log book for 3 months to check private running against business use, which I think can be used for the next 3 years. I think the vehicles are all around 95% or so business use, and depreciation is claimed each year with the same ratio. I have another car which is the only thing in my personal name, which is for private use only.


    Regards
    Graeme Fowler
    Facebook Property Chat Group NZ
    https://www.facebook.com/groups/340682962758216/

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    • #3
      You use a Porsche 911 and a Ferrari as company cars? Good for some.

      What about fringe benefit tax? How does that fit into the picture?

      Comment


      • #4
        What about fringe benefit tax? How does that fit into the picture?
        Yes, FBT is paid on the Toyota.

        Regards
        Graeme Fowler
        Facebook Property Chat Group NZ
        https://www.facebook.com/groups/340682962758216/

        Comment


        • #5
          Are those vehicles owned outright buy the trust orion.
          regards Frankwhite

          Comment


          • #6
            Hi Frank, the company owns them, not the trust.
            They are both financed at about 9% interest, which I thought would be better than tieing up so much in equity.

            Regards
            Graeme Fowler
            Facebook Property Chat Group NZ
            https://www.facebook.com/groups/340682962758216/

            Comment


            • #7
              Sorry about that i meant company and thanks for the reply orion
              Regards Frankwhite

              Comment


              • #8
                Don't take forum postings as tax advice!!

                Oh dear

                IMHO if a car in a company is available for Private Use then it is liable for FBT. 95% business use means 5% private use means available for private use means FBT is due. Tax inspector was either a newbie or half asleep. Posting your REAL name in your post may well have been a tactical error there Orion (Sorry Graeme), as I would suggest any tax inspector worth his salt would be trolling here from time to time.


                Suggest you get yourself infront of your accountant ASAP and have a talk. I would be very interested in any thoughts to the contrary - maybe I'm getting ultra conservative in my old age.

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                • #9
                  Re: Don't take forum postings as tax advice!!

                  Originally posted by BrentM
                  IMHO if a car in a company is available for Private Use then it is liable for FBT. 95% business use means 5% private use means available for private use means FBT is due.
                  From orions previous posts I'm guessing he's already aware of that - ie. already paying FBT on the Prado...

                  and I can see why...

                  ...personally I'd be a bit over the ferrari and porsche after driving it around all day for work too... why on earth would you then want to take your work home with you?

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                  • #10
                    Thanks Orion and others for your replies. Seemed to sway a wee bit off track from my original question though

                    I've never considered FBT and GST as most books I've read, say GST is not a biggie if investing only in properties.

                    I'll add that to my list for things to read and learn about...

                    Bye

                    Chief Wiggum

                    Comment


                    • #11
                      Originally posted by ChiefWigum
                      I've never considered FBT and GST as most books I've read, say GST is not a biggie if investing only in properties.
                      If you are a private property investor, you dont have to worry about GST. If you choose to purchase a company car etc, I believe FBT is still something which needs to be considered.

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