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Purchase with company?

Discussion in 'Accounting & Tax' started by db444, 7th Aug, 2015.

  1. db444

    db444 Member

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    Hi,

    tried a search for this as a past question but no joy.

    Can members advise advantages of using a company to purchase IP rather than in own name? I am not after negative gearing.

    Thanks
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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  3. db444

    db444 Member

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    That was a long and interesting read, thanks for the link.

    I like the idea of the company for my personal situation in choosing when to distribute earnings.

    If you were the director would any of the company assets ever be seen as yours? I understand the separate legal entity but was thinking of the new values for pension tests? i.e I have $1 but my company is worth $2m?

    Would there be any difference in inheritance? Your kids inherit property from company or from you?
     
  4. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Company ownership can and will involve additional tax. The most neive approach is to consider the company tax rate. The problem with that approach is that a company will pay 30% but on top of that the shareholders will ultimately also pay tax on that SAME income. Sometimes a credit is given. Sometimes, This can ultimately be a far higher tax rate.

    Kids cannot inherit company assets. Just a right or entitlement to personal shares. Maybe. Owning shares but lacking company control as a director is a aweful position.

    Personal tax advice is a must as is legal and estate planning advice from a lawyer
     
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  5. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Centrelink would sent you a phone book to complete. A fail for assets tests maybe ? We do aged care assessment advice and there are numerous issues.
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    None of the company's assets would ever be your's. But the shareholder would be holding shares worth the relevant percentage of the company's value.

    For social security reasons you should real ss 1207 onwards of the Social Security Act 1991 http://www.austlii.edu.au/au/legis/cth/consol_act/ssa1991186/
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes, totally different. Share which you own could be inherited if you owned them, but not the directorship. Generally it is the majority shareholders that control a company.
     
  8. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    Ever ?? Family court doesnt share that view as it can deem income / assets. Also Centrelink can treat accumulated profits as a proportionate asset despite Corps Act. Or trust controllership etc Richstar decision and many others. Use of a company or trust can be worse than personal ownership.
     
  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes 'ever'.

    A company is a separate legal entity and none of its assets would ever be the assets of the director. But Centrelink will consider the control test and the source test when looking at private companies - this is why I referred to the social security act above.

    Not sure what Richstar has to do with this. That was a case involving an ASIC prosecution and the assets of the trust were not deemed to be assets of the individual. What was said that the assets were control as good as if they were the assets of the individual. At law they were not. Family law Act allows a court to make orders against a trustee or a company to transfer assets - but again this doesn't mean they are the assets of the individual unless or until such an order is made.

    This is why it is important to get legal advice from a lawyer.
     
  10. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    A company is a separate legal entity and none of its assets would ever be the assets of the director. OR shareholders.

    Unlike a unit trust a shareholder has no beneficial interest in the property of a company.
     
  11. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    One of the reason why I also think legal advice is important. Too often well intentioned people think a company involves legal separation when it may not. Richstar was but one but there are numerous family law, tax and other cases where apparent asset protection / separate structure has been ignored. Even Personal Services Income rules overlooks/looks through the entity to a degree. Tax law can even hold a Director personally liable for company tax debts (unpaid super and PAYG withholding) by issuing a simple one page A4 notice.

    Legal and tax advice on entity formation is now tax deductible too :)
     
  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes - but I think it is only deductible if it relates 'business'. i.e. setting up a trust to invest would not be. But I haven't seen the legislation.