Hi,
I understand that it may be better, when buying investment property to set up a company first and have the company buy the investment property. This is better for tax purposes, especially if using LAQC. In my own case I am considering downsizing - that is, we move out of our current house (house A) in Wellington which I own (mortgage paid off) and buy a cheaper one (house B) further out. We rent out the house we have just moved out of and the rental return (appraised at 560pw) pays the mortgage on the cheaper house (~800 per month mortgage) we have just moved into and a small income besides.
One way to do this would be to pay for house B by mortgaging house A, and offset the interest payments against the rental returns, reducing tax liability. Would the tax people frown on this?
Pardon my ignorance, but is there any benefit to forming a company to do this, and if so how do I "give" our house to my company?
Would I be better off just having both house A and house B in my own name, declare the rental income as taxable income and pay the mortgage on house B out of what the tax man left me with?
Thanks.
I understand that it may be better, when buying investment property to set up a company first and have the company buy the investment property. This is better for tax purposes, especially if using LAQC. In my own case I am considering downsizing - that is, we move out of our current house (house A) in Wellington which I own (mortgage paid off) and buy a cheaper one (house B) further out. We rent out the house we have just moved out of and the rental return (appraised at 560pw) pays the mortgage on the cheaper house (~800 per month mortgage) we have just moved into and a small income besides.
One way to do this would be to pay for house B by mortgaging house A, and offset the interest payments against the rental returns, reducing tax liability. Would the tax people frown on this?
Pardon my ignorance, but is there any benefit to forming a company to do this, and if so how do I "give" our house to my company?
Would I be better off just having both house A and house B in my own name, declare the rental income as taxable income and pay the mortgage on house B out of what the tax man left me with?
Thanks.
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