COMPANY
An investment property under this structure enjoys the benefits of limited liability because it is a completely separate and distinct legal entity from its owners, but there are limitations to the tax efficiencies that can be applied.
Companies will attract higher compliance costs and there are some possible complications with capital gains when selling any property to related parties.
Capital gains can only be distributed, tax-free, upon the wind up of a company. This fact needs to be considered if you are planning on holding multiple rental properties in the same company.
One of the tax benefits that companies enjoy is the automatic deductibility of interest, regardless of the intention of the loan. This is in contrast with the other business structures outlined here, where interest is only deductible on loans that were originally taken out on the property.
LOOK THROUGH COMPANY
This is the successor to the Loss Attributing Qualifying Company( LAQC). It’ s an ownership model that still benefits from the limited liability of a standard company structure, but with the added benefit of being far more tax efficient.
Taxable profits or losses( apart from residential property losses which are ring fenced) are passed straight through to its shareholders in proportion to their shareholdings, then tax is paid at their respective marginal tax rates.
This is a model that is less flexible in terms of tax when compared to the distribution options available to trusts, but compliance costs are generally lower than those of a trust.
Again, there are complications around taking out loans and drawing cash out of the company, and it is a very different situation when compared to the sole proprietor / partnership model.
We recommend seeking the professional advice of a chartered accountant about whether a company structure is right for your investment.
INVESTMENT INFORMATION GUIDE 15