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Poll: How would ring-fencing of residential rentals affect you?

This poll will close on 28-02-2018 at 12:13 PM

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  1. #1
    Join Date
    Feb 2010
    Posts
    266

    Default Ring Fencing Question ?

    Hi
    The latest NZ Property Investor mag has an article about Ring Fencing.

    They state "Every other industry sector out there is allowed to offset legitimate losses against other income."

    I have an LTC so I understand how you "offset legitimate losses against other income" using the LTC.

    But if I worked for wages and also ran a "normal" limited liability company...lets say it made and sold plastic yellow ducks...how do you
    "offset legitimate losses against other income" in the limited liability company ?

    Is there somewhere on a tax form where you show any tax paid from your waged job so it can be included in the tax owing
    on the limited liability company ?

    Or is it done differently or is the article wrong ?

    Thanks
    Richard

  2. #2
    Join Date
    Jun 2004
    Posts
    9,707

    Default

    I don't think you can - that's why we have LTC's.
    I suspect there is more to the context of the article but maybe not.
    The quality of some of those articles is little better than the newpapers these days.

  3. #3
    Join Date
    Feb 2010
    Posts
    266

    Default

    Yes I also thought that was why LTC's were created...not the only reason but one of them.

    Maybe the writer of the article Mark Withers might be kind enough to come on here and explain what he
    meant ?

    Thanks
    Richard

  4. #4
    Join Date
    Jun 2004
    Posts
    9,707

    Default

    OK - I had to go and read the article.
    The analogy is odd. Seems he started with a view and formed the article around it.
    I have an LTC and a normal company.
    The normal company has commercial property - it accumulated some losses and next year I might finally have used them all up.
    Just the senario he suggests is unfair!
    Hello - it happens now.

    Look at Xero - huge accumulated losses. The shareholders don't get to use these!

  5. #5
    Join Date
    Oct 2013
    Posts
    1,511

    Default

    Haven't yet read this month's magazine, it's still possible to "offset legitimate losses against other income" in the limited liability company

    Just not your personal income.

    Consider if your company holds a loss-making long-term-hold rental property, and also operates a profitable property trading business - or a profitable fruit stall, for all it matters. You can claim the rental losses against the fruit profits, and only pay tax on the net result.
    AAT Accounting Services - Property Specialist Accounting - AATAccounting.co.nz
    Lower fees for investors, traders & real estate agents!
    [email protected] for more information.

  6. #6
    Join Date
    Jun 2004
    Posts
    9,707

    Default

    Quote Originally Posted by Anthonyacat View Post
    Haven't yet read this month's magazine, it's still possible to "offset legitimate losses against other income" in the limited liability company

    Just not your personal income.

    Consider if your company holds a loss-making long-term-hold rental property, and also operates a profitable property trading business - or a profitable fruit stall, for all it matters. You can claim the rental losses against the fruit profits, and only pay tax on the net result.
    Given that the details of the proposed ring fencing isn't out it would be hard for Mark to have commented wouldn't it?
    Or maybe there are details and I've missed them (quite possible).

  7. #7
    Join Date
    Feb 2010
    Posts
    266

    Default

    Hi
    Thanks Anthonyacat.
    Your explanation makes sense.

    Yes your company can offset losses but you cannot offset those losses against your personal income.

    That is the way I thought Ring Fencing worked.

    Maybe the articles author should have said...."Every other industry sector out there is allowed to offset legitimate losses against other income.AS LONG AS IT IS NOT PERSONAL INCOME "

    Thanks
    Richard

  8. #8
    Join Date
    Oct 2013
    Posts
    1,511

    Default

    Quote Originally Posted by richard56 View Post
    Maybe the articles author should have said...."Every other industry sector out there is allowed to offset legitimate losses against other income.AS LONG AS IT IS NOT PERSONAL INCOME "

    Well, that comment isn't about structure so much. Every other industry sector is allowed to offset losses against their personal income, if the business is in an LTC, Partnership, or Sole Trader structure.
    AAT Accounting Services - Property Specialist Accounting - AATAccounting.co.nz
    Lower fees for investors, traders & real estate agents!
    [email protected] for more information.

  9. #9
    Join Date
    Feb 2010
    Posts
    266

    Default

    Hi
    So only a Limited Liability Company cannot offset losses against their personal income. ?
    Richard

  10. #10
    Join Date
    Oct 2013
    Posts
    1,511

    Default

    Quote Originally Posted by richard56 View Post
    Hi
    So only a Limited Liability Company cannot offset losses against their personal income. ?
    Richard
    And a trust.
    AAT Accounting Services - Property Specialist Accounting - AATAccounting.co.nz
    Lower fees for investors, traders & real estate agents!
    [email protected] for more information.


 

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