(Here’s my easy 7-step process to choose the right one)
Do not get your tax structure wrong, it’s like building your house on a weak foundation – can be costly in the long run.
Rookie mistake: Property owners commonly come to me for advice after they’ve 𝗮𝗹𝗿𝗲𝗮𝗱𝘆 purchased their property. The best time to get advice is 𝗯𝗲𝗳𝗼𝗿𝗲 you make that purchase.
Here’s my recommended approach:
𝗦𝘁𝗲𝗽 𝟭: 𝗗𝗲𝗳𝗶𝗻𝗲 𝘆𝗼𝘂𝗿 𝗳𝗶𝗻𝗮𝗻𝗰𝗶𝗮𝗹 𝗴𝗼𝗮𝗹𝘀
Ask yourself – what are you aiming for? Are you planning to hold the property long-term for rental income, or are you hoping to flip it for a quick profit? Start by clearly outlining your financial goals.
𝗦𝘁𝗲𝗽 𝟮: 𝗥𝗲𝘀𝗲𝗮𝗿𝗰𝗵 𝗽𝗿𝗼𝘀 𝗮𝗻𝗱 𝗰𝗼𝗻𝘀 𝗼𝗳 𝗱𝗶𝗳𝗳𝗲𝗿𝗲𝗻𝘁 𝗯𝘂𝘀𝗶𝗻𝗲𝘀𝘀 𝘀𝘁𝗿𝘂𝗰𝘁𝘂𝗿𝗲𝘀
Understand the tax impact of different structures. It’s important to know how each tax structure works. Here are the 5 commonly used structures in New Zealand:
✅ Individual Ownership
✅ Partnership
✅ Company Ownership
✅ Look-Through Company (LTC)
✅ Trust Ownership
𝗦𝘁𝗲𝗽 𝟯: 𝗨𝗻𝗱𝗲𝗿𝘀𝘁𝗮𝗻𝗱 𝗮𝗱𝘃𝗮𝗻𝘁𝗮𝗴𝗲𝘀 𝗮𝗻𝗱 𝗱𝗶𝘀𝗮𝗱𝘃𝗮𝗻𝘁𝗮𝗴𝗲𝘀 𝗼𝗳 𝗲𝗮𝗰𝗵 𝘁𝗮𝘅 𝘀𝘁𝗿𝘂𝗰𝘁𝘂𝗿𝗲
Consider key tax rules like the bright-line test and ring-fencing rules. For example, remember ring-fencing rules limit the ability to offset rental property losses against other income.
𝗦𝘁𝗲𝗽 𝟰: 𝗔𝗹𝗶𝗴𝗻 𝘁𝗵𝗲 𝘀𝘁𝗿𝘂𝗰𝘁𝘂𝗿𝗲 𝘄𝗶𝘁𝗵 𝘆𝗼𝘂𝗿 𝗼𝘄𝗻 𝗴𝗼𝗮𝗹𝘀 𝗮𝗻𝗱 𝗿𝗶𝘀𝗸 𝘁𝗼𝗹𝗲𝗿𝗮𝗻𝗰𝗲
Your tax structure should align with your long-term financial goals and how much risk you’re willing to take. For instance, if you want to limit personal liability, a company or trust might be a better option than individual ownership.
𝗦𝘁𝗲𝗽 𝟱: 𝗘𝘃𝗮𝗹𝘂𝗮𝘁𝗲 𝗰𝗼𝗺𝗽𝗹𝗶𝗮𝗻𝗰𝗲 𝗰𝗼𝘀𝘁𝘀
Each structure comes with its own compliance obligations and costs. A company or trust might give you more flexibility, but they also require higher accounting and legal fees. Make sure the structure you choose is affordable and right for your situation.
𝗦𝘁𝗲𝗽 𝟲: 𝗦𝗲𝗲𝗸 𝗽𝗿𝗼𝗳𝗲𝘀𝘀𝗶𝗼𝗻𝗮𝗹 𝗮𝗱𝘃𝗶𝗰𝗲 𝘁𝗼 𝗲𝘃𝗮𝗹𝘂𝗮𝘁𝗲 𝘆𝗼𝘂𝗿 𝗼𝗽𝘁𝗶𝗼𝗻𝘀 𝘁𝗵𝗼𝗿𝗼𝘂𝗴𝗵𝗹𝘆.
Tax law is complex, and property ownership can bring unexpected challenges. Consulting a professional can ensure you don’t overlook important aspects and that your structure is right for your situation.
𝗦𝘁𝗲𝗽 𝟳: 𝗙𝗶𝗻𝗮𝗹𝗶𝘀𝗲 𝘆𝗼𝘂𝗿 𝗱𝗲𝗰𝗶𝘀𝗶𝗼𝗻
After thorough research and seeking advice, choose the structure that best supports your goals. This will set a strong foundation for your property investment.
I help Kiwi property owners save thousands of dollars in taxes by protecting them from costly errors.
If you are looking for specific advice, then I provide this through a Strategic Consultation. This Strategic Consultation will be tailored to your specific circumstances and questions.
Book here: https://lnkd.in/gvV4tWUK
