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A hypothetical example... - lets leave GST completely out of this to begin with.
As it stands, Jeff owns properties which are for either long term investment properties (meaning retirement 15-20years away), and the house he owns and live in. All of these properties are owned in Jeff's own name.
Jeff buys another house, this time with the intention to renovate it, add capital value, and then sell it in 6-12 months time, for a profit.
Obviously the intention is to make a profit, so therefore there is income tax to pay on the profits. e.g.
Sale price at completion 200,000
expenses (50,000)
less purchase price (100,000)
profit = 50,000
tax @ 33% = (16,500)
net profit = 33,500
The house is sold, profit is made and Jeff is happy.
Jeff now "needs" to sell his long term investment property (which he thought would wait for retirement) and sells this property for more than what he paid for it 2 years ago. He needs to sell this property due to financial problems.
Questions:
1) What do you think is the best way to structure the purchase of the development property to keep Jeff's development interest separate from his long term investments and own house? (avoid tainting and associated person rules) *
2) does he need to pay tax on the long term investment property he sold due to financial problems?
3) if he sold the long term investment property to free up capital for other developments would he have to pay tax?
* I have previously heard of people setting up trading trusts and buy and hold long term trusts. I don't know if the rules still allow this - as a means to avoid associated parties? But could someone go into a bit more detail about who would be the settler, the trustee, the beneficiaries ect?
What about if you set up two trusts - one for your family/bach home, and another for your long term buy and hold properties (yourself as the trustee and kids/dog
as the beneficiaries). Then set up a company for your developments? (as you as the shareholder and director) You pay tax on each property you buy and sell for developments in the company, and the trusts are separate - or would they be, because you are the trustee and the director/shareholder of company?
I know the people with the answers are not probably going to contribute much here - as this is where their money for intellectual property is very high. but hopefully someone with experience or someone nice who will share will come forward and give their thoughts!
As it stands, Jeff owns properties which are for either long term investment properties (meaning retirement 15-20years away), and the house he owns and live in. All of these properties are owned in Jeff's own name.
Jeff buys another house, this time with the intention to renovate it, add capital value, and then sell it in 6-12 months time, for a profit.
Obviously the intention is to make a profit, so therefore there is income tax to pay on the profits. e.g.
Sale price at completion 200,000
expenses (50,000)
less purchase price (100,000)
profit = 50,000
tax @ 33% = (16,500)
net profit = 33,500
The house is sold, profit is made and Jeff is happy.
Jeff now "needs" to sell his long term investment property (which he thought would wait for retirement) and sells this property for more than what he paid for it 2 years ago. He needs to sell this property due to financial problems.
Questions:
1) What do you think is the best way to structure the purchase of the development property to keep Jeff's development interest separate from his long term investments and own house? (avoid tainting and associated person rules) *
2) does he need to pay tax on the long term investment property he sold due to financial problems?
3) if he sold the long term investment property to free up capital for other developments would he have to pay tax?
* I have previously heard of people setting up trading trusts and buy and hold long term trusts. I don't know if the rules still allow this - as a means to avoid associated parties? But could someone go into a bit more detail about who would be the settler, the trustee, the beneficiaries ect?
What about if you set up two trusts - one for your family/bach home, and another for your long term buy and hold properties (yourself as the trustee and kids/dog
as the beneficiaries). Then set up a company for your developments? (as you as the shareholder and director) You pay tax on each property you buy and sell for developments in the company, and the trusts are separate - or would they be, because you are the trustee and the director/shareholder of company?I know the people with the answers are not probably going to contribute much here - as this is where their money for intellectual property is very high. but hopefully someone with experience or someone nice who will share will come forward and give their thoughts!
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