LTC Shareholding change

[Henry_NZ]

Hi,

We owned a rental property under ltc
Me and my wife would have different income next year.

Wife would be doing part time.

Our understanding is having LTC, is that we can change the shareholding so that the tax losses or gains can be offset to the "most appropriate" income level.

ie : if Gains on rental, then should change shareholding so that most of the gains is allocated to the lower income level

if losses on rental, then should change shareholding so that most of the losses is allocated to the higher income level.

Our accountant said that this is tax avoidance ?!?

is that right..?

Ready to change my accountant, wanna make sure first.

Thanks

[Wayne]

sounds like tax avoidance to me - rearranging purely for tax purposes.
But I'm not an accountant.

[Rosco]

LTC's are an entity specially set up a few years ago by IRD and the government, that allow profit or loss to go to shareholders in proportion to their shareholding.

So I think it's hard to argue that using this structure is tax avoidance, and part of this structure is obviously that you can change the shareholding. Otherwise if the shareholding is fixed for life, then why have them?

Having some commercial reason is good idea, and a good accountant could help with these.

Be careful changing shareholding as there can be catches such as depreciation recovery, or tax on sale (tainted by trader), so get expert advice before doing this.

Ross

[cube]

And work out how much tax you'll save, compared to the costs of getting the expert help and performing the transfer.

[BlueSky]

Cant offset against shareholders income anymore. Can only do either on property or portfolio basis.

How is the structure any good for LTC that is making profits.


Discussions who are in in this category say you better off having a simple plan, as the new trusts etc will only make compliance tougher.

https://www.beany.com/2019/07/shareholding-changes/

[Rosco]

Every situation is different. The right structure for each property investor is very fact specific.

Some people, a Trust is needed. And yes this means extra costs to set up and administer, but for some this is necessary.

LTC, some people this can be best. Extra costs are tiny, with the cost to set up only $160 to $300, and a $45 annual company office annual return. Some times a different structure is needed to maximise interest deductions. And yes LTC's can be very effective and useful where there is a profit to.

Sole trader and partnership, are generally very restrictive long term and result in higher legal costs later, or lost interest deductibility or paying higher tax rates than necessary.


Overall there isn't a perfect answer for everyone.