Purchasing a property under a company (as a non-resident)

Discussion in 'Legal Issues' started by Peter88, 26th Dec, 2016.

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  1. Peter88

    Peter88 Member

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    Hi Guys,

    I have a little bit of a unique case, looking for any advice or recommendations. I've been reading and searching through the threads on this forum for the last few weeks and learnt quite a bit, but still nothing quite like my case.

    Firstly, I will be coming to Brisbane in February, can anyone recommend a good property accountant and lawyer? I intend to form a company, and have my brother acting as a nominee director (since he is a resident and I am not).

    I am a NZ citizen & former Aus resident, currently living abroad. I'm looking to buy a residential property in Brisbane first, and then possibly commercial. The first property I buy will be without financing, so I intend to loan/gift(?) my company $380-$400k, and then for future purchases a lease/low doc loan with 30% down payment from my personal account (more loans to the company?).

    Here are the three main reasons / questions on why I am thinking to form a company for my situation. Please let me know if I am mistaken on any of these, as I haven't spoken to a professional yet.

    • I am a non-resident for tax purposes, so any income is already taxed at 32.5% at the minimum. (I do plan to move back in a 2 - 4 years time though)

    • If the company takes out a loan, the repayments will lower the profit of the company and therefore the taxable income(?) I want all the rental income to feed back into new investments in the portfolio. Is this correct? or if I can only write off the interest like an individual?

    • Protect future assets in case of divorce. I am currently unmarried, but that could change in the next year or so. I plan to buy more property in the future could be married. If the properties are held under a company, that was on a prenuptial agreement before marriage, then it will be easier to protect new properties bought while married, rather than have new property bought come under martial assets if held in my personal name?

    Sorry for the long post, any advice or recommendations on who is good to talk to in Brisbane is much appreciated.

    Cheers
     
    Last edited: 26th Dec, 2016
  2. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    One hassle could be that you may need a resident director

    that resident would need to be a guarantor

    ta

    rolf
     
  3. Peter88

    Peter88 Member

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    Hi Rolf, i'm thinking to getting my brother to be one of the directors, he is an Australian resident.

    If the company is paying off a bank loan, do the loan repayments get cut from the companies profit? It seems logical to me, but i may be incorrect.
     
  4. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

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    Interest is deductible for a company that borrows to invest just like an individual.

    you need to consider the foreign foreign acquisitions and take overs act. The company may be deemed a foreign person if a foreigner controls it.

    Consider the new stamp duty regulations too.

    Who will own the shares?

    Will the company be a resident for tax purposes? Maybe not if the central control and management are overseas.

    Will your bro be willing to guarantee future loans?

    What about the withholding taxes for foreign loans?

    Considered land tax?
     
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  5. Blacky

    Blacky Well-Known Member

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    Also don't forget that if the equity you inject (lend) to the company is borrowed you cannot claim any deductions from the interest incurred.

    Would a trust with corporate trustee be a better/alternative option?

    Are you making the best use of capital paying cash for the property? Would it be better to leverage as much as possible and put the cash in offset?

    quite a complex issue which needs personalized advice

    Blacky
     
  6. aussieB

    aussieB Well-Known Member

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    What has changed ? I did some google-fu but didn't find anything - may be I don't know what am looking for.
     
  7. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

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    The is a surcharge for foreign persons now being introduced in many states including NSW and vic
     
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  8. Peter88

    Peter88 Member

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    Thanks for the feedback guys. It's definitely a complicated situation, I will definitely set some appointments when i come in Feb.

    Will definitely look into the trust with corporate trustee.

    I agree putting the cash up front is not ideal, but I got rejected by my Aussie bank and 2 mortgage brokers. I don't earn any income in Aus or Nz, and I have no assets in those countries, so they see it as a huge risk. I even asked about lowdoc/lease loans with large down payments, but that was still a no go. With that roadblock and my company earning decent money I didn't spend to much more time on it. My only hope is with this upfront capital i can then have a quick turn around and get other properties.


    Damn, so if the company earns $20k first year in rent after expenses, but has to pay $15k back to the loan, the taxable income is still $20k and not $5k?

    The shares would be owned by me, or by a discretionary trust. My brother would be the local director, no shares or ownership. He is a lot younger than me so i doubt his personal guarantee on future loans would mean much (no assets, low paying job, he is just 20).

    The money i'm saving to buy the property with is already in my aus bank account, so i don't think it'd be going down a foreign loan route. This might not be the best scenario, but keeping money in the third-world is not a good idea, and with weak AUD, I try to send any spare money i have there.

    I assume the company would be a resident for tax purposes.

    For the stamp duty, is this new policy including kiwis? I noticed a lot of the laws that apply to other foreign investors don't apply to kiwis or are as harsh.

    For the land tax, as far as i'm aware because i'm not currently a resident in Aus, the company tax rate would be the same as if i was an individual (350k bracket).


    Thanks for all the feedback!
     
  9. sanj

    sanj Well-Known Member

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    By all means make appointments for Feb when you're in Australia but there's nothing stopping you paying for some of Terry's time, considering he is a lawyer well versed in structures etc, as well as a tax expert if I'm not wrong, but not a lawyer. From what it sounds like you need someone like him more than an accountant anyway but either way pay someone extremely competent for their time and reap the benefits
     
  10. Terry_w

    Terry_w Structuring Lawyer and Finance Broker - all states Business Member

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    Damn, so if the company earns $20k first year in rent after expenses, but has to pay $15k back to the loan, the taxable income is still $20k and not $5k?




    If the company earns $20,000 and pays $15,000 in interest then its taxable income would be $5,000. If it then pays $5,000 back in principle the income is still the same. Similar to you paying a loan back, you cannot claim the principle.



    The shares would be owned by me, or by a discretionary trust. My brother would be the local director, no shares or ownership. He is a lot younger than me so i doubt his personal guarantee on future loans would mean much (no assets, low paying job, he is just 20).



    A discretionary trust may be a non resident trust too if its central control and management is offshore.


    If your brother has a low paying job it will be difficult for the trustee to borrow.

    What could happen if your brother entered a relationship with someone?



    I assume the company would be a resident for tax purposes.



    It can be dangerous to assume!



    For the stamp duty, is this new policy including kiwis? I noticed a lot of the laws that apply to other foreign investors don't apply to kiwis or are as harsh.



    You will have to get legal advice on this. Stamp duty laws vary from state to state and there have been many recent changes.

    For the land tax, as far as i'm aware because i'm not currently a resident in Aus, the company tax rate would be the same as if i was an individual (350k bracket).



    Sounds like you are talking about QLD. The threshold is the same for a company and trustee and an individual not ordinarily resident in Australia. But the rates of land tax are completely different.
     
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  11. Peter88

    Peter88 Member

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    Thanks for the information Terryw.