Hi guys, Just wanted someone to check my numbers. I’m looking at investing in a joint venture: Investment amount $100k Investment fee payable $15k Return 50% = 50k Investment period 18 months Interest (18 months @ 4.44%) = 6.6k Overall profit = $27,400 (50k – 15k – 6.6k) After tax profit via Trust (38%) = $17,000 Have I stuffed up anything? Have I completely overlooked something? Thanks for your time.
What's an investment fee? Also, this is just a maths exercise since you haven't given any context yet. And even those basic numbers are setting off all sorts of alarm bells for me. What kind of JV investment has a 50% return in 18 months? A risky one?
How much are you borrowing? Is the interest amount calculated once in the 18 months, or is it calc daily? The Y-man
If the JV was in a entity you ignored GST (if it applied) and also taxes. Eg if it was a JV company and you own 50% of shares you may not yet even have income. A company shareholder earns income based on a declared dividend and it could be part of profit, all of profit or even be after tax. Entitlement to 50% may not be assured or a given on a specific date. Trust ? I dont understand a trust paying tax - Or the 38% tax rate.
It's like a pooled amount of money for a property development among many people. You put in $100k and receive that money back plus 50% once the development is complete. The $15k fee is to be a part of the project You're right. It should be calculated daily. I'm guessing it's not really a JV in a structured sense. The investment would be in the name of a trust, so the profit goes back into the trust and then distributed to the beneficiaries (which has a 38% tax rate). Again, perhaps I'm missing something. Thanks everyone! I appreciate the support and help.
Sounds like a trust. Likely (hopefully) a unit trust, fixed trust or similar. The fee may or may not be deductible. At end of each tax year you should receive a copy of financials and tax and that will determine your respective tax issues. Your interest may (or may not) be deductible against trust income at Item 13 in the return.
What does the documentation say ? The documents they provided to you ? Debt vs equity ? Answer to that question will affect the tax treatment.
And it also may be a concern if the "profit" is reflected as a capital gain on the units / shares etc. There was a tax alert on that issued in recent years