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  1. #21
    Join Date
    Oct 2003
    Posts
    3,578

    Default

    Quote Originally Posted by SJL 01
    Hi CJ
    Actually I believe you are wrong, the capital dividend is raised to repay the shareholders current account and is therefore paid tax free to the shareholders and IS fully tax deductable to the company.

    Sue
    A dividend is a dividend. Repaying a current account is repaying a loan. Different things. The latter is ok as you are swapping one loan for another.

  2. #22
    Join Date
    Mar 2004
    Location
    Wellington
    Posts
    140

    Default

    There is an appropriate structure that can deliver maximum dedcutible funding to you "friend" but not enough of the constraints that must be understood have been identified to arrive at it yet.

    Your "friend" should not have owened the initial two properties directly. The price of this is likely to be some depreciation recovered as the properties are now sold into an LAQC at market value. The new lower depreciation rates will also likely apply going forward. The LAQC ( and I would recommend a fresh one) can finance the properties 100%, either relying on a guarantee over property three, or using an 80/20 two bank strategy.

    The proceeds of the financing are paid to the vendor (your friend) who can then repay the debt on her PPOR.

    While the chequebook is out to remedy the situation, consider a trust for the PPOR, and possibly using the existing company as a nominee for the trust.

  3. #23
    Join Date
    Nov 2005
    Posts
    3,286

    Default

    Some great advice here.

    My 'friend' is, as I said before, only a distant acquaintance whose situation I heard about because of a slight indiscretion by another friend and because I asked some penetrating nosey questions. I thought the situation might have proved of interest here which it seems to have done.

    My general thoughts are that this is a good example of why it is important to get a structure set up correctly at the beginning because to amend or alter it later, even by a relatively small amount, can be difficult and expensive. The debate here would back that assumption up I think.

    xris
    Last edited by xris; 31-07-2006 at 10:43 AM.

  4. #24
    Join Date
    Apr 2006
    Location
    Auckland
    Posts
    406

    Cool Big Brother(Sister?) Watching

    There may well be solutions to such situations, but the place to resolve them is not on PT.

    Remember IRD read PT posts and audit its members from time to time on the basis of their posts. I know of at least one case where a PT member got audited of their posting and their posts were used as evidence against them.

    You should all be cautious of this point in discussing tax online, as you may get a friendly visit from your local IRD office if what you say is at odds with their view.

    It always makes me laugh watching Property Climbers as the punters being interviewed basically prove intention of resale as they tell the presenters of their gains and intention to sell at time of acquisition, - prima facie evidence of intention to deal in property and automatic liability to IRD for tax on gains for doing so if they are picked up.

    I bet they arn't thinking about that when they tell the presenter how clever they are.

    Matt Gilligan CA

  5. #25
    Join Date
    Feb 2004
    Location
    Newcastle-under-Lyme
    Posts
    3,066

    Default

    Matt
    Surely if they are being honest both with the IRD and on here there should be no problem... I mean if you have to avoid mentioning it publicly it sounds more like tax evasion than minimisation...

    Cheers
    David

  6. #26
    Join Date
    Apr 2006
    Location
    Auckland
    Posts
    406

    Default

    I think its more a case of if you say things one way, it can be tax avoidance, if you say them another, its not. ( Commercial v tax focus in a transaction.) But because people tend to focus on one issue in a forum,eg tax, they can be quoted out of context and things look like avoidance when they are not.

    But you are dead right, if people are honest, they have less to fear. What concerns me is someone who is honest getting quoted out of context. Also someone shooting themselves in the foot without realising it.


    Last thing - people have a right to know they are being watched online by IRD. Its only fair.

    Matt Gilligan CA
    www.gra.co.nz
    Last edited by Matt Gilligan; 02-04-2008 at 09:50 AM. Reason: typo

  7. #27
    Join Date
    Feb 2004
    Location
    Newcastle-under-Lyme
    Posts
    3,066

    Default

    Matt I agree absolutely (it is something I have pointed out in the past, namely that PT is a public forum so while it may feel like you are chatting with some mates actually you are talking to the world) and I take your point given the importance to the IRD of intentions one could inadvertently imply an intention other than one had by discussing it online in a particular way.

    Cheers
    David

  8. #28

    Default

    One other thing to consider is the actual tax position taken by an investor.

    IRD will only act on the actual tax position (this could include income tax and / or GST) taken by the investor (be a tax position which is agressive, neutral or no position at all - such as a Nil return or no return filed) so i wouldn't be hugely concerned unless i was making statements along the lines of operating a profitable business but knowing that i am not returning income for tax purposes OR the intention of my actual business structure.

    Granted, you might want to be careful in what you say in any forum, such as internet forums or even those property TV shows. Because it could give IRD an insight into your actual intentions or provide a starting point for them to begin looking. I think that it is similar to having a conversation at the Pub about your business .. but everyone at the Pub is party to the conversation, not just your friends and there is a permanent record of what has been discussed.


 

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