BEFORE YOU purchase your next Commercial property, you do need to take some advice on which purchasing vehicle is right for you — because it’s definitely not ‘one size fits all’.
Tax Considerations
The Australian Tax Office is quite happy for you to arrange your affairs so as to minimise the tax you pay. In other words, it is quite legal for you to avoid tax — you simply cannot evade it.
Income tax and capital gains tax are clearly two important issues to consider when arranging your property investments; and so, too, a is GST. But tax planning is not the only factor to consider.
There are other commercial concerns which, depending on your circumstances, you should also address. Apart from ensuring your overall flexibility, you also need to be able to:
- admit ‘partners’ down the track;
- allow one or more individuals to sell out when desired;
- cope with future tax changes;
- handle a marriage breakdown;
- cope with the death of one or more individuals;
- pass on the investments to future generations; and
- take advantage of the new superannuation provisions.
If you haven’t already done so, you need to give careful thought to these matters in choosing the best investment “vehicle” for your next purchase.
From a Tax Viewpoint, which Vehicle is best for you?
The simplest way to answer this question is to fully review the advantages and disadvantages of the commonly recommended tax structures, which best suit your circumstances. Those possible structures (investment vehicles) include a …
- Company
- Fixed trust (commonly referred to as a unit trust)
- Partnership, or joint venture
Depending upon your particular situation, there will be one vehicle better suited to your needs. And it is vital for you to determine that BEFORE you finalise the Contract of Sale, for your next purchase.
You may prefer to obtain advice from your Accountant. Alternatively, most competent legal firms will have a taxation division, which can provide you with that advice.
And this is always my preference — because there is then less chance of something being able to “slip through the cracks”.
My Recommendation?
It’s entirely up to you, but what I do my clients (particularly those from interstate) is introduced them to HWL Ebsworth — who are one of my Trusted Consultants. And that would occur after the negotiations have been concluded, but BEFORE signing the Contract of Sale.
Generally, the discussion about the most appropriate investment vehicle takes only about 15-20 minutes with their Tax Partner, who will join the initial meeting.
However, the real advantage comes from being able to dovetail the formation of that vehicle, with the conveyancing aspects of the Contract itself — because everything is now happening in-house.
Bottom Line: You are able to leave that initial meeting with the comfort of knowing the transaction will now be documented in the most tax-effective manner.
Plus, it will also provide you with the greatest flexibility down the track; and you now have one less thing to follow up in the process.
If you would like to learn more about your options with the various Investment Vehicles … you can obtain a quick guide as to the differences between Companies, Trusts and Partnerships.
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