Create an innovative business for substantial tax savings

Company Solutions Ltd. offers you the accountancy and business experience of founder Garth Melville. In addition to legal consultation this wealth of experience enables Company Solutions to optimise your company and trust structures so that they operate as one business unit.

This achieves you multiple benefits, including (but not limited to):

• Limited Liability
• Asset Protection
• Estate Planning
• Substantial income tax savings for medium to high income earners on an ongoing basis

For example, repositioning the mortgage on the sale of a property can improve interest deductibility for tax.

If you would like a tailored consultation with Garth Melville (the managing director) to gain valuable beneficial advice for your personal or company structure, trusts and/or tax options to suit your circumstances, please complete the simple form below and we will get back to you ASAP.
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Consider the following scenarios:

Scenario 1

You own a home in Auckland worth $280,000 that has a mortgage of $10,000 at 8% interest - you therefore pay $800 per year in interest. This $800 is non-deductible for tax.

You have savings of $30,000 and you decide to buy a new home for $300,000 and rent out your existing home.

SUMMARY

Your home is worth		$280,000
Your mortgage is		$10,000
At 8% your mortgage interest is		$800
You have savings of		$30,000
You buy a second house for		$300,000

EFFECT

Your rental property (old home) has deductible interest each year of $800 to offset against rents received.
Your rental property therefore makes a taxable profit.

You purchase your new property for		$300,000
less your deposit of		$30,000
which requires a mortgage of		$270,000

Thus your non-deductible interest is $21,600 ($270,000 at 8%)

Scenario 2

You do the same as above but you form a family trust to which you sell your old home.

Your new trust is a separate new taxable entity.
The trust can raise the full purchase price of $280,000 on mortgage.
The mortgage would straddle both properties.

The trust will pay you the $280,000 for ownership of the property and you in turn repay the original $10,000 that you owe personally.

You therefore have a net $270,000 available to invest in your new home plus your savings of $30,000.

SUMMARY

The trust buys your home for		$280,000
You repay your mortgage of		$10,000
With your savings you now have		$300,000

EFFECT

You now have no personal, non-deductible interest

Your trust now has a mortgage of		$280,000
At 8% the deductible interest is		$22,400

This deductible interest can be offset against rents received.

Once other expenses such as depreciation are taken into account, the rental property will probably make a taxable loss. This taxable loss can then be offset against other family trust income.

On the top tax rate of 39 cents in the dollar this saves your family trust more than $8,400 every year!

Company Solutions Ltd. builds and customises these structures according to your unique requirements. We welcome you to contact us directly and arrange time to discuss your situation.