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LTC vs Personal Ownership

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  • LTC vs Personal Ownership

    Hi All,

    I am about to purchase my first investment property in Auckland.

    Been reading lots on how to structure the ownership but I cant figure out what tax or other advantage owning a single investment property through an LTC provides over personal ownership?

    Any advice??

    Thanks!

  • #2
    I think there is just one advantage - ability to sell it (or part of it) to someone else without any solicitors involved: just sell shares of the company.

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    • #3
      Hi Zooreeni,

      Each ownership option has advantages and disadvantages.

      The main advantage for an LTC, is flexibility. Say you and your wife both are earning over $70k, and buy a rental making a loss. You might start off 50/50, with half the loss offsetting each income. But then you take a 2 year holiday from work. So the LTC would allow you to change the shareholding around, so might change to 99/1, so that 99% of the loss offsets your wife income.
      Could look at a Trust owning the LTC shares long term as well.

      A disadvantage of an LTC, is that if you move to Aussie, then the LTC loss won't be recognised in Aussie, so no offset against Aussie personal income.

      Another thing to consider, is whether you will be putting money in, and then trying to take out later. An LTC can give some advantages around tax deductibility of getting the money back out, but there are a few different options.

      Ross
      Book a free chat here
      Ross Barnett - Property Accountant

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      • #4
        Hi Rosco and ivanp thanks for your responses!

        Based on the feedback here and my own research I am now leaning towards personal ownership in my name only, as my partner is busy with the kids and does not work.

        If my understanding is correct, if owned personally in both our names then I am entitled to claim only 50% of any losses incurred.

        And further to this, when the kids are older and my partner does start to work/pay taxes it should be easy enough to change over to and LTC then to share the losses.

        Thanks!

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        • #5
          Personally, i don't see much value in LTC so far: can't imagine situation where my properties generate more losses than I can offset with my income (how would I pay mortgage in that case?). Taking two year holiday sounds strange to me in my 30s

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          • #6
            Originally posted by ivanp View Post
            Taking two year holiday sounds strange to me in my 30s
            You need to think ahead!

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            • #7
              Kids
              accident
              loss of job
              I have a client who recently left for South America for over a year, and they would be late 30's or early 40's.

              zooreeni - what would be your commercial reason for selling the property from you to an LTC at a later date?

              As I put earlier, there are lots of ifs and buts, and things to consider. Also costs for each action, such as if you own 10 properties in your personal name, then sell to an LTC, you are looking at large legal costs!

              I would always suggest getting professional advice now, based on your circumstances.

              Ross
              Book a free chat here
              Ross Barnett - Property Accountant

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