New Law: Buy & Hold (Rental Trust) / Buy & Sell (Trading Trust) ??

[Bluekiwi]

I want to pay tax: I want to buy, renovate and sell properteis and pay tax.

I also want a long term rental portfolio:

The old system of Trading Trust for your trades and LAQC / Rental Trust for Buy and Holds is under threat !!!

According to proposed changes.

I heard from GRA that there would be some ruling or indication from the IRD in June as to what the new laws will be ?

Has anyone heard anything ?

I dont want to spend 8k to 10k setting up all my structures to find it has all changed, so I am in limbo.

[CJ]

The new tax bill is expected in the next 2 weeks. This will have the new Associated party rules in it. They may change between introduction as a bill and becoming an act but I would at least wait until the bill comes out.

note: it was expected earlier this month but now expected first week in July.
note 2: It is unlikely it will be enacted before the election. However, this is being driven by IRD, not labour per-se so a change in government should not effect the final output, just the timing.

[FrozenWaves]

New Tax Bill?

Has this new tax bill come about yet?

I am about to set up a structure for buy and holds, and am wanting to start with an LAQC but am holding back incase the rules are changed and it wont be worth me having an LAQC anymore...

I am currently looking for my first investment property and want to get the structure right the first time. I am expecting that my first place will make a small loss so would like to gain the tax benefits of using an LAQC if possible.

Cheers

[SuperDad]

FW,

You can get most, if not all of the tax benefits by holding the property in your own name. (The one difference is if you will be buying the property jointly with a person who is taxed at a lower rate than you are.)

Paul.

[Bluekiwi]

FW,

You can get most, if not all of the tax benefits by holding the property in your own name. (The one difference is if you will be buying the property jointly with a person who is taxed at a lower rate than you are.)

Paul.

You forget Tainting

[SmallBrain]

Put it this way, if you are single, then there is no need to use LAQC, as you are likely to be the sole owner of the IP.

If you're married and planning to have kids, then again DO NOT use LAQC, as that affects your WFF entitlements. If your Mrs is concerned about having the IP all in your name only, tell her not to worry as the Property (Relationships) Amendment Act takes care of it should you ever part ways.

As I see it now, for most investors, LAQC is not the way to go.

[FrozenWaves]

I was thinking more along the lines of when the property does start to make a profit it would be slightlier easier to transfer the property to a family trust by selling the shares to the trust?? Does this make sense?
So the new law hasnt been discussed then?

[SuperDad]

No tainting for a buy and hold Bluekiwi.

FrozenWaves explicitly asked what structure to use for a buy and hold.

Paul.

[SuperDad]

I was thinking more along the lines of when the property does start to make a profit it would be slightlier easier to transfer the property to a family trust by selling the shares to the trust?? Does this make sense?
So the new law hasnt been discussed then?

It does make sense, but if you want the property in a trust why not buy it into a trust?

Sure, you don't get access to the tax relief instantly - rather, losses are held in the trust and offset against future income.

Paul.

[FrozenWaves]

Yes i have thought of that but i would need the tax benifits now in order to prop up cashflow, what i want to know is, is it worth setting up a LAQC now only to find out that the LAQC regieme mite be getting changed or abolished completly?

[SmallBrain]

Transferring shares of an LAQC to a Trust still takes years just like transferring an IP owned in your name to a Trust, as the gifting rule still applies in both cases.

The only difference is that you don't need to change the title (hence saving money) if the IP is held in an LAQC. That said, if you're entitled to WFF, then the extra money you could get by having the IP in your name could be thousands a year. You do the math.

Edit: As so many have pointed out my mistake, I better amend my post in case some readers don't read through the thread...

Another difference/advantage of using an LAQC is the ability to transfer (via shares) all IPs in the LAQC without depreciation clawback.

[SuperDad]

Yes i have thought of that but i would need the tax benifits now in order to prop up cashflow, what i want to know is, is it worth setting up a LAQC now only to find out that the LAQC regieme mite be getting changed or abolished completly?

That kind of change is always a risk.

Just as there is a risk that trust law might be changed to the detriment of those who use trusts.

Paul.

[Bluekiwi]

Who put thsoe little stars next to thread topic and what do they mean ?

[Perry]

Who put those little stars next to thread topic and what do they mean ?

Look down the Additional Options when you're composing
a reply. You'll see a Rate Thread option, where you can
give a score. As I understand it, the aggregate of all
replying posters 'scoring' shows up as those stars.

The Additional Options are to be found further down
from the place where you type your reply. Look for
"choose a rating."

[Re@der]

I like the LAQC because of the options it gives me to change ownership for tax advantage or perhaps other reasons in the future such as giving equity to my children or even moving it into a trust. All these changes of ownership can occur without depreciation tax clawback.