LTC decisions

[CraigD]

We've had an LTC for a year which bought a commercial property and has all shares allocated to my partner. Circumstances have changed and we now are thinking to transfer 100% ownership to myself. Does anyone know what the implications of this would be?

Also my accountant has said that commercial & residential should not be owned by the same LTC as it makes GST accounting difficult. Is this really the case?

Cheers

[andyp2010]

I can only say through the experience with a breakup and how that affecting my holdings when they were transferred to me, I'm no professional.

The main implication was that I had to reapply for finance and pay a solicitor a small fee. There wasn't any extra taxes for the transfer of equity (I love NZ!)

And I had a similar thing when my company grew and changed to GST registered. Whole new set of accounts otherwise its too messy but that's more from your accountants point of view than anything. Don't know if it could taint your residential holdings and make you subject to GST on those though.....

[lissie]

I am no accountant - but a company is either registered for GST or not - commercial rents are liable for GST, residential are not. So I would have thought it would be much easier to have separate companies.

[Rosco]

We've had an LTC for a year which bought a commercial property and has all shares allocated to my partner. Circumstances have changed and we now are thinking to transfer 100% ownership to myself. Does anyone know what the implications of this would be?

Also my accountant has said that commercial & residential should not be owned by the same LTC as it makes GST accounting difficult. Is this really the case?

Cheers

Hi Craig,

1) Often when you transfer shares in an LTC, you end up with a deemed sale. For rental properties that have accumulated building depreciation, this means you often have to pay tax on the building depreciation previously claimed. For you, you won't have depreciated your building as this stopped 1/4/11. But it is still a deemed sale, so still important to consider other possible effects. If you are a trader, or associated to a trader, then you could be liable for tax on the capital gain if sold within 10 years.

2) Often we would keep the commercial and residential seperate, as easier and safer. Say the residential is at the beach, and then you start renting it short term, providing sheets, towels etc. Then falls into the GST net, and you would have to pay GST on sale. But if it is just a standard residential rental, then should be no problem having a commercial and residential in the one entity.

Ross