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Changing Shareholdings in LTC

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  • Changing Shareholdings in LTC

    Hi guys, just after some thoughts.
    I'm a reduced hours salaried worker and business owner and on roughly $150K/yr and my wife is an at home mum. We are buy and hold investors. We started our LTC in 2012 and purchased several properties. Our last property purchase was in 2015. This year is the first year we are going to pay tax on our rentals. We have been focusing on paying down our debt over the past 5 years since our last rental purchase, so I can only see us paying tax year on year from now on. I currently have 100% shareholding in the company. Can I change the shareholding to 100% to my wife and 0% for me? My accountant says no as this would be classed as tax avoidance which got me thinking, what are the legitimate reasons for changing shareholdings?
    I have also thought about creating a trust for asset protection due to my business risk and have been advised to do so, but that got put on hold due to covid etc. I'm at a point where I can stop using my personal home as security over the rentals as well. My mortgage broker has advise that I contact my lawyer for a formal discharge request.
    I know that changing shareholdings may trigger brightline rules, but that doesn't matter as I don't intend to sell.
    Many thanks in advance.

  • #2
    Originally posted by Chewbucca View Post
    My mortgage broker has advise that I contact my lawyer for a formal discharge request..
    A corollary aspect you may like to consider.

    Leaving a mortgage in place, with a liability of zero, can be done. And without risk, as I understand it. That way, borrowing afresh is so much easier as almost all the security paper work is already in place.

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    • #3
      Hi Chewbucca,

      Our members who are Accountants will be best placed to provide you with their recommendations.

      regards,

      Donna
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      • #4
        Originally posted by Chewbucca View Post
        Hi guys, just after some thoughts.
        I'm a reduced hours salaried worker and business owner and on roughly $150K/yr and my wife is an at home mum. We are buy and hold investors. We started our LTC in 2012 and purchased several properties. Our last property purchase was in 2015. This year is the first year we are going to pay tax on our rentals. We have been focusing on paying down our debt over the past 5 years since our last rental purchase, so I can only see us paying tax year on year from now on. I currently have 100% shareholding in the company. Can I change the shareholding to 100% to my wife and 0% for me? My accountant says no as this would be classed as tax avoidance which got me thinking, what are the legitimate reasons for changing shareholdings?
        I have also thought about creating a trust for asset protection due to my business risk and have been advised to do so, but that got put on hold due to covid etc. I'm at a point where I can stop using my personal home as security over the rentals as well. My mortgage broker has advise that I contact my lawyer for a formal discharge request.
        I know that changing shareholdings may trigger brightline rules, but that doesn't matter as I don't intend to sell.
        Many thanks in advance.
        Hi Chewbucca,

        100% you, and change to 100% wife - what is your commercial reason? apart from tax, what is the reason?

        This is the issue and why it could be classed as tax avoidance.


        But there is other ways you can do this, which potentially could be even more effective! This is video example that you might enjoy

        Or there is also some less aggressive ideas that could work.

        Brightline reset is an issue, but you can sometimes work around this too.

        Ross
        Book a free chat here
        Ross Barnett - Property Accountant

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