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  • Asset protection Company or trust?

    Hi everyone!

    I am just about to start investing in property and I would like to set up the correct structure for my future properties before i start purchasing. Im finding it very hard to find the right advise for my situation I have gone to lawyers and they are telling me to go to an accountant and I have been to Accountants and they have told me to go to a Lawyer.

    My situation is I work overseas and am currently a non tax resident of NZ as iv been working overseas for the past 6 years. My plan is to purchase property while overseas and use it to create financial freedom so I may come back to NZ and take on a stress free job and not worry about money or how much I get paid as my current job is very stressful and long hours. So I will eventually become a tax resident again and I need to take this into account in my structure even though i know i will be paying tax on any profit I make on any investment in NZ.

    So im stuck with the advise of some saying I should set up a trust and some a company?

    I will need to be able to access my equity in the properties so I may use it as a deposit for future purchases. I will also need the protection for the possibility of being sued for any reason over here in Europe as it is much more common then NZ and also break ups in relationships etc.

    So if anyone has any advise on what my best option would be it would be greatly appreciated

    Thanks in advance!

  • #2
    Why not both???....a company owned by a trust would give you the some of the advantages of both.

    Just because you've been out of NZ for 6 years doesn't mean you're not a tax resident.....trust me I know....after 7 years the IRD told me I was (not that it mattered for me) ......http://www.ird.govt.nz/resources/a/3...4a30/ir292.pdf

    cheers
    spaceman

    Comment


    • #3
      Thats definately an accountant question as they will know the best structure for your circumstances. They will ask you whats more important asset protection or tax minimisation and advise from there.

      i have the structure spaceman refers too, but a trust is very expensive to set up. we would have been better off just using a company until we had a few properties and were making money and then set up the trust.

      Comment


      • #4
        Adman25,

        I am in the same situation as you, an investor working and living overseas. I use the structure spaceman mentions above.

        looks like the following

        - Trust (Beneficiaries are my family members and myself)
        - A company that is the Trustee of the Trust
        - I am the director of the company

        Any profits made by the trust can be allocated to the beneficiaries. The profits are taxed at the beneficiary's tax rate. for example, the profits are paid to me, I pay 10.5% tax as I am not a tax resident of NZ at the moment (living and earning income overseas).

        The important thing with this kind of structure is to make sure the administration side of the Trust is kept up to date at least once a year. I use GRA (www.gra.co.nz) to set up and maintain the admin side for me.

        Shane

        Comment


        • #5
          Hey Guys

          Thank you so much for your replies all your information has been very helpful!!

          Hi Shane could you please give me an idea of what your set up costs were like for a company and a trust and yearly maintenance on them? just so i can get a rough idea. Also does this structure allow for access to withdraw equity in a property in the trust easily? And do you have any recommendations for a lawyer to set up a company or is this something I can just get my lawyer to do?

          Sorry for this newbie question but if I was to start as you say KyronGosse as having a company first with out a trust until I have purchased some property is the company easy to add as a Trustee to the trust or would it have to be gifted over time?

          Thanks again these have been the straightiest answers I have had from any other person

          Comment


          • #6
            you wouldn't add the company as trustee, you would most likely gift your shares to the trust. you want the corporate trustee to have no assets for protection.
            it cost us roughly $5000 for the trust, that was with GRA too, i think they have a good international team, but i've since changed to WHK. a good accountant will be able to set you straight and also provide an estimate on costs. they usually don't charge for the initial 'interview' so visit a few. They will also take into consideration all your circumstance i.e income, investing strategy, country you are in. for example what they recommended we did when we lived in aussie is completely different to what they recommended once we moved back.

            you wouldn't normally use your lawyer to set up a company that would be a job for the accountant, however it is simple to set up a company you can do it yourself on the companies website. www.companies.govt.nz, if you are trading and gst is involved its likely to be a tad trickier though.
            Last edited by KyronGosse; 29-12-2012, 10:28 PM.

            Comment


            • #7
              Setting up a Trust need not be expensive. I have set up several
              for family members for about $10+costs (mainly conveyancing),
              each.* There's Trusts On-line, too, if you're checking options.

              A corporate trustee is definitely the way to go. My present
              arrangements are:

              1) Trust with corporate trustee owns all rentals
              2) Trust leases rentals to a PM company
              3) PM company rentals/leases rentals to tenants.

              Nothing especially flash about that. Works well for me. Some
              downsides are that the more entities are involved:

              4) the greater the accounting costs
              5) the more attention to detail is needed
              6) a little more complicated to manage
              7) someone on PT recently mentioned that the annual return
              ....filing fee had been buggerised around to assist the current
              ....crop of W'gton woodenheads try to get back into a slender
              ....surplus by their target date, meaning extra costs for coys.

              Being a NZ resident might make a difference. AFAIK, Spaceman
              has gone from o'seas to NZ resident - perhaps he can describe
              the changes (if any) implicated in that.

              * I am not an accountant or lawyer
              Want a great looking concrete swimming pool in Hawke's Bay? Designer Pools will do the job for you!

              Comment


              • #8
                Originally posted by Adman25 View Post
                Hey Guys

                Thank you so much for your replies all your information has been very helpful!!

                Hi Shane could you please give me an idea of what your set up costs were like for a company and a trust and yearly maintenance on them? just so i can get a rough idea. Also does this structure allow for access to withdraw equity in a property in the trust easily? And do you have any recommendations for a lawyer to set up a company or is this something I can just get my lawyer to do?

                Sorry for this newbie question but if I was to start as you say KyronGosse as having a company first with out a trust until I have purchased some property is the company easy to add as a Trustee to the trust or would it have to be gifted over time?

                Thanks again these have been the straightiest answers I have had from any other person
                Adam25,

                My mind is a bit foggy on set up costs of the structure I use, as it was over 3 yrs ago now. but around $3,500 rings a bell.

                GRA's maintenance fee for the trust is around $350

                Shane

                Comment


                • #9
                  Happy New Year!!

                  Thanks so much everyone for all your help!

                  I really look forward to getting stuck into buying this year!

                  I have organised a phone call to discuss my situation with GRA and will be taking your advise on having a company within a trust. I would rather someone set this all up for me as I See it one of the most important investments I can make and I don't want to get it wrong and bite me later on in life.

                  For any overseas investors do you have any advise on sourcing property when abroad? I wont be home until November so my only options will be by telephone and internet to set up a relationship with local RE agents and Property managers. Also as Im overseas I can't log into Trademe and get notitifications of new properties that are listed in areas I am looking at as it has locked my account by logging in abroad in the past. I live in Europe and we currently 12 hours behind NZ so this makes things a little hard for phone calls etc. I have tried property finders before but ended up with a lemon and the worst experience ever!!

                  Any help will be much appreciated

                  Thanks again!
                  Last edited by Adman25; 02-01-2013, 07:51 AM.

                  Comment


                  • #10
                    IMHO you need to use somebody you already know and trust to help you invest from overseas..........anybody that will be taking money to help you invest is really only interested in the money.



                    Good luck

                    Cheers
                    Spaceman

                    Comment


                    • #11
                      Originally posted by Adman25 View Post
                      Also as Im overseas I can't log into Trademe and get notitifications of new properties
                      that are listed in areas I am looking at as it has locked my account by logging in abroad
                      in the past.
                      See if you can arrange to use a NZ proxy server to solve that problem.
                      There are a few geek forumites who may offer you some suggestions
                      Want a great looking concrete swimming pool in Hawke's Bay? Designer Pools will do the job for you!

                      Comment


                      • #12
                        Originally posted by Perry View Post
                        See if you can arrange to use a NZ proxy server to solve that problem.
                        There are a few geek forumites who may offer you some suggestions
                        I have no problems logging into my Trademe account from overseas. I stay logged in the whole time.

                        What is the supposed issue?

                        Shane

                        Comment


                        • #13
                          I logged in once from a European ip address I was only browsing and they blocked my account. I called them and they said that the account was accessed outside of NZ and it wasn't allowed or at least in Europe maybe its ok in Australia or selected countries. Iv tried a proxy server called vtunnel it works but at a snails pace maybe i can look at finding a NZ proxy to go through that i pay a fee for.

                          Comment


                          • #14
                            Interesting topic again. I also fall down in the same category, living abroad and non-resident tax applies.

                            Since we are talking about building a portfolio from scratch. Why not start with a company and when there are few properties think of a trust too.

                            Is there any negative with the approach?

                            Comment


                            • #15
                              Originally posted by Adman25 View Post
                              I logged in once from a European ip address I was only browsing and they blocked my account. I called them and they said that the account was accessed outside of NZ and it wasn't allowed or at least in Europe maybe its ok in Australia or selected countries. Iv tried a proxy server called vtunnel it works but at a snails pace maybe i can look at finding a NZ proxy to go through that i pay a fee for.
                              Yes - that's exactly I was told by Trademe. Logon to trademe is only allowed from NZ and Aussie no other place. The restriction that Trademe has on their portal.

                              @ Shane - I am very surprised that you are able to logon to it without using any NZ proxy.

                              Comment

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