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Tax Minimisation
"The hardest thing in the world to understand is the income tax."
-- Albert Einstein (1875-1955)
Each of our clients will require something different when it comes to tax minimisation as each will have different income and expenditure and different personal circumstances.
Don't get confused as there is a big difference between tax minimisation which is legal and tax avoidance which is illegal.
Tax minimisation on a lawful basis is itself an entirely proper practice. Large numbers of individuals and virtually all businesses do what they can to lower their tax bill. Indeed in the case of companies, the interests of their shareholders demand that they minimise all costs, including tax costs. Directors have a duty to act in the best interests of the company, which includes not paying more tax than is necessary. This has long been understood by the courts.
Tax minimisation can be effective in a number of areas:
- Restructuring and refinancing with a tax focus (Individuals and companies contact Mark Turnock).
- Investments
Investment Property
Most rental investments generate a taxable loss in the initial years and, if structured appropriately, these losses can generate sizeable tax refunds.
After discussions with our clients - where we find out their current financial position and what their goals are - we evaluate which structure is the most appropriate for that particular situation.
Individual/Partnership are by far the most common ownership structures. This is generally the easiest to administer, but offers minimal asset protection and tax minimisation possibilities.
Trusts provide an excellent method of asset protection. The major weakness of trust ownership is that tax losses generated by a rental property investment are isolated in that trust. Unless the trust generates income from other sources, these losses cannot be used for tax minimisation purposes.
Loss Attributing Qualifying Company (LAQC) ownership of rental investment is a flexible structure option. It allows losses to flow down to shareholders there by maximising tax savings. Having the individual own the LAQC shares in their own name minimises the important issue of asset protection. However, at some stage in the future the shares could be sold to a trust to gain asset protection.
There is no perfect structure and at Strategic Planning Group Limited we look at the whole picture before advising on the most appropriate ownership structure for our clients.
The company offers a full range of services for rental investment owners, via referrals to an accountancy firm including tax return preparation, LAQC and Trust set up, as well as offering in-house general financial planning assistance.
If you are looking at, or have already purchased, a rental investment please feel free to contact Mark Turnock.Other Investments
The issues regarding other investments aside from investment property include:
- Ownership - getting the structure correct between spouses whilst avoiding gifting issues, to minimise taxable quantum
- Tax effectiveness of individual holdings or funds within a portfolio
- Deductibility of investment fee as an expense
- Salary sacrifice
Please contact us as we would need to do a full Financial Analysis before being able to make any assessment or recommendations.
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