If any of these apply to you
between 1 April 2003 to 31 March 2004, you can request
a Personal Tax Summary here. You will need your total interest and/or
dividend information to complete the request form.
KEY
ISSUES TO ADDRESS WHEN TAKING ON A PARTNER IN BUSINESS
Determine who does
what.
You don't have to do everything
together. It eats money and resources when you're a small business. Align
your responsibilities with our strengths and avoid duplication of effort.
Use expert advisors.
Starting and sustaining a business
is way too complicated to navigate the legal and financial waters alone. Hire
an accountant and a solicitor. Their expertise is invaluable. Using these
resources from the beginning will help you put in place agreements that
will smooth the way in any future separation also.
Communicate often.
Talk about what you're doing right
as well as what you think needs improvement. Discuss your strategy and
direction weekly.
Talk about personal values and vision.
Be truthful to yourself and your
partner. Talk at length about your personal vision for the business and what
you value most in your personal lives.
Decide who will decide.
Discuss your decision-making
process or plan on stumbling over important decisions. You can't have more
than one leader in any given situation. Determine who has the authority over
what type of decisions. Decide who will be the final decision-maker before
deciding on issues.
Make sure you're on the same page.
Can you survive if the business
stumbles? Are you willing to walk away from business that will drag you down?
Can you see the possibilities of business expansion? Be honest with yourself
and your partner. Realize things change. Heed warning signs early.
Discuss what work means.
It takes many different skills to
be successful. Make sure each of you understands that running the business is
as critical as providing your product or service.
WHAT
IS AN LAQC?
One of the possibilities as
an ownership vehicle of investment property is a Loss Attributing
Qualifying Company (LAQC). This may or not be ideal depending on circumstances,
and can provide flexibility in the ownership structure. An
LAQC is simply a standard limited liability company, which takes on a tax
election, to give it Loss Attributing and Qualifying Company status with the
Inland Revenue Department.
This regime is only
available to companies with fewer than five shareholders. It was introduced to
try to make the taxing of small family companies similar to that of
partnerships. It has provided an excellent flexible structure for property
investors.
Where there is a tax
loss, as is the case in many negatively geared situations, the tax loss can be
attributed back to the shareholders in the company in proportion to their
shareholding in the company. Thus planning prior to the
incorporation of the company is important, as there may be an advantage in the
highest income earner holding a major shareholding in the LAQC to maximise the
benefits of any tax losses.
An LAQC offers the
possibility to restructure the ownership of the company without
necessarily having to incur recovery of depreciation on sale of the actual
property itself .
Capital profits made by the company
on sale of property can be distributed to shareholders tax-free, by paying an
exempt dividend from the capital gain.
It
should be remembered that assets and liabilities of the LAQC are attached to the
shareholders and shareholders accept personal liability of any liabilities that
the LAQC may have e.g. loans, income tax liabilities.
TAX
AVOIDANCE INVOLVING LAQCs AND THE FAMILY HOME
Inland Revenue has noted with concern that a group of taxpayers are selling
their private home to a loss attributing qualifying company (LAQC), and then
claiming tax deductions.
Selling your private home to a LAQC in order to claim a tax deduction for what
are really private expenses, may be tax avoidance in some cases, says Margaret
Cotton, of Inland Revenue.
"Unfortunately, some investment advisors are telling their customers that
they can claim a tax deduction by selling their residential property to a loss
attributing qualifying company, renting the property back from that company
and claiming a tax loss," said Ms Cotton, National Manager of Technical
Standards.
"Inland Revenue considers that such arrangements will often be tax
avoidance for the purposes of income tax," she said.
Ms Cotton explained that Inland Revenue is currently considering several cases
where a LAQC has been used to buy a residential property that the shareholders
will rent as their residence. Even where a market rental is paid to the LAQC,
a tax loss can still be generated to the advantage of the shareholders.
Where tax avoidance is proven, the taxpayer must pay the tax avoided as well
as a penalty of 100% of the tax avoided. Use of money interest will also
apply.
Ms Cotton says that if taxpayers are concerned about their position in respect
of these arrangements then they should contact their local Inland Revenue
office or seek professional advice.
HAVE
YOU NOTICED?
Why the sun lightens our hair, but darkens our
skin?
Why women can't put on mascara with their mouth closed?
Why don't you ever see the headline "Psychic Wins Lottery"?
Why is "abbreviated" such a long word?
Why is it that doctors call what they do "practice"?
Why is it that to stop Windows 98 or XP, you have to click on
"Start"?
Why is lemon juice made with artificial flavor, and dishwashing liquid made
with real lemons?
Why is the man who invests all your money called a broker?
Why is the time of day with the slowest traffic called rush hour?
Why isn't there mouse-flavored cat food?
When dog food is new and improved tasting, who tests it?
Why didn't Noah swat those two mosquitoes?
Why do they sterilize the needle for lethal injections?
You know that indestructible black box that is used on airplanes?
Why don't they make the whole plane out of that stuff?
Why don't sheep shrink when it rains?
Why are they called apartments when they are all stuck together?
If con is the opposite of pro, is Congress the opposite of progress?
If flying is so safe, why do they call the airport the terminal?
The information
provided in this email newsletter is for informational purposes only.
McLean and Co. accept no responsibility for the opinions and information
expressed in the information provided and it is provided "as
is" without warranty of any kind. The user
assumes the entire risk as to the accuracy and use of this document.
Readers are asked to seek professional advice pertaining to their
own circumstances. The McLean and Co. email newsletter
may be copied and distributed subject to the following conditions:
 |
All text must
be copied without modification and all pages must be included.
|
This document
must not be distributed for profit.
|
|
