Starting out - tax nonsense

[shasta]

If I were to setup a Trading Trust to perform my trading activities, and subsequently distribute the profits to my children who are the beneficiaries of the trust. Will that be considered as tax avoidance and get the IRD to knock on my door ?

If your using a Trust dont forget to show the initial funds as a loan, so you can "gift" up to $27,000 a year tax free.

If you structure it right with your partner you may be able to gift $54,000.

Just remember using a Trust means you must be aware that Trustess are meant to act in the best interests of it's beneficiaries, a high risk trading strategy could come back on you, should you lose capital.

Better to trade using a company & have the Trust own the shares...

Make sure you write down why you want to do this, & what you expect to achieve, that way your accountant can get it right first time.

Over the years i've seen so many flawed structures, because someone didnt want to pay a few $ to an Accountant & get it done properly.

You really need to get it right to start with.

Using a Trust means you should have a longer term focus.

Perhaps a Trust would be better suited for a more conservative investment portfolio, & an LAQC company used for trading?

You need to specific your aims, goals & requirements for doing this, & THEN look at a structure.

Happy to help

[Jay]

Shasta , what is your "learned opinion" on trustees, who they should be.

When my Trust was set up, I was not the settler but a beneficiary and trustee with my solicitor.
To me this is still not so "bullet" proof, as they will usually just sign what ever you put in front of them within reason.
Thinking of changing trustees to myself and my wife or under a company with us as directors.
Generally speaking, is one of the above a better, as then we can sign the minutes etc etc there and then

[newbe]

If your using a Trust dont forget to show the initial funds as a loan, so you can "gift" up to $27,000 a year tax free.

If you structure it right with your partner you may be able to gift $54,000.

Just remember using a Trust means you must be aware that Trustess are meant to act in the best interests of it's beneficiaries, a high risk trading strategy could come back on you, should you lose capital.

Better to trade using a company & have the Trust own the shares...

Make sure you write down why you want to do this, & what you expect to achieve, that way your accountant can get it right first time.

Over the years i've seen so many flawed structures, because someone didnt want to pay a few $ to an Accountant & get it done properly.

You really need to get it right to start with.

Using a Trust means you should have a longer term focus.

Perhaps a Trust would be better suited for a more conservative investment portfolio, & an LAQC company used for trading?

You need to specific your aims, goals & requirements for doing this, & THEN look at a structure.

Happy to help

I Shasta, I'm just cathing up on this thread and see you seem to know a lot about Trusts. I run a business, carry out share trading and my wife and I own our own house. Where could we obtain the best advice on setting up a trust? And how do we learn about the ways it can benefit us? Maybe we could start another thread on trusts?

[shasta]

I Shasta, I'm just cathing up on this thread and see you seem to know a lot about Trusts. I run a business, carry out share trading and my wife and I own our own house. Where could we obtain the best advice on setting up a trust? And how do we learn about the ways it can benefit us? Maybe we could start another thread on trusts?

It's hard to advise on such complex matters without having a bit more info.

What existing structure does your business use?

What is your motivation to use a Trust, asset protection, tax, risk management?

Do you have a personal mortgage, or any debt with the business?

What is your current family situation, do you have children, if so what age?

Are you an investor or share trader, if you're trading i'd avoid doing this via a Trust (too many issues to explain)

If you would rather not post personal info here, PM me

[Stylerz]

Shasta if i were to work in Australia for the next couple of years, and i keep my nz property and shares, what would my tax obligations be?

Been trying to work it out off the ird and aussie tax websites but cant quite get my head around it.

Where would i pay the tax on income for renting my house? Just to the Auz tax department?

All of my shares are PIE trusts. So no further tax to be paid in New Zealand. But if i move to Aussie would there be additional tax to pay on them?

Thanks in advance!

[shasta]

Shasta if i were to work in Australia for the next couple of years, and i keep my nz property and shares, what would my tax obligations be?

Been trying to work it out off the ird and aussie tax websites but cant quite get my head around it.

Where would i pay the tax on income for renting my house? Just to the Auz tax department?

All of my shares are PIE trusts. So no further tax to be paid in New Zealand. But if i move to Aussie would there be additional tax to pay on them?

Thanks in advance!

By way of having a relationship still with NZ (having property/shares/family ties) you will still be regarded as an NZ taxpayer.

There is also the 180 day residency rule, so in any case the first year you will be considered a NZ taxpayer still.

Without knowing your exact situation, it would seem you will be an NZ taxpayer.

Any income derived in Australia will be taxed at source & payable to the Australian tax authority.

You will then need to account for your Australian/Overseas income in your NZ tax return.

As NZ & Australia have a "DTA" (Double Tax Agreement), any tax paid in Australia will be offset against your total income (NZ + Oz).

You pay tax on your NZ rental income as per normal, as if you were still in NZ.

BTW, your shares won't be exposed for CGT (as in Australia), whether they are from the ASX or not, as you will be an NZ taxpayer.

Hope thats clear enough!

[Stylerz]

Thanks Shasta for the helpful reply.

Looks like i will be able to keep my property and shares without it being to much hassle. Didnt really want to have to sell everything.

Is there any time limit that i can be a NZ tax payer, and work in Auz.

Should there be any additional tax to pay when i submit my Auz earnings and property income to the NZ IRD?

[shasta]

Thanks Shasta for the helpful reply.

Looks like i will be able to keep my property and shares without it being to much hassle. Didnt really want to have to sell everything.

Is there any time limit that i can be a NZ tax payer, and work in Auz.

Should there be any additional tax to pay when i submit my Auz earnings and property income to the NZ IRD?

If you continue to have a "relationship" with NZ, ie Property, Family, Investments etc, you will be deemed an NZ resident for tax purposes, & there isn't a time restriction.

With regards to additional tax, the tax credits from any overseas income, are only claimable up to the maximum that would otherwise be claimable in NZ. (Makes sense as the NZ IRD won't send you a refund, on your tax paid to the Australian IRD!).

Heres a link that might be handy for you to bookmark

http://www.ird.govt.nz/yoursituation...tax-residency/

Have a wee read, & if you want anything explained in plain english let me know

[fish]

2 years ago my wife and I took out a big margin loan to invest in nz equities with the aim of increasing our income now and to provide a retirement income in ten years or so .

I have substantial personal income but my wife only has a couple of part-time paye jobs earning about $20,000 pa .

The interest on the margin loan being tax deductable plus all the imputation credits means that she has $40000 of excess imputation credits which my accountant says she cant use against paye and has to carry forward .

Clearly we would like to put them to good use. Ideas so far are her to create a business-but we are really are to busy for that , or become a director of a company -a definate possibility .

Any other ideas ?.
Anyway she could stop paying paye now .
Can imputation credits be transferred between husband and wife ?

[shasta]

2 years ago my wife and I took out a big margin loan to invest in nz equities with the aim of increasing our income now and to provide a retirement income in ten years or so .

I have substantial personal income but my wife only has a couple of part-time paye jobs earning about $20,000 pa .

The interest on the margin loan being tax deductable plus all the imputation credits means that she has $40000 of excess imputation credits which my accountant says she cant use against paye and has to carry forward .

Clearly we would like to put them to good use. Ideas so far are her to create a business-but we are really are to busy for that , or become a director of a company -a definate possibility .

Any other ideas ?.
Anyway she could stop paying paye now .
Can imputation credits be transferred between husband and wife ?

Your wife could approach the IRD to change her tax rate to reflect the level of imputation credits she cannot use, i know in some situation this can happen.

Failing that!

There is no current way of transferring imputation credits between individuals/spouses etc (btw Peter Dunne is advocating income splitting).

To transfer the investment income to her will require some tinkering.

You could do off-market transfers (at market value) into a company with both you & your wife as Directors, but not as shareholders*, as it may be hard to prove to the IRD this isn't a tax avoidance scheme.

Now to get around that issue, you could set up a Trust which owns all the shares in the company.

This gets around the issue of Trustees liability issues around share trading (as it's done by the company directors).

Any profits can be paid to the Trust, along with imputation credits attached, & if you structure the Trust so that you are Trustee & she is the beneficiary, the dividend is passed through to her.

Run this scenerio past your Accountant, as i'm not 100% up with the tax laws (been 7 years out of the CA environment).

Potential Issues with the above:

1. Moving trading/investments into a company/trust means accounting for unrealised gains/losses, that individuals do not need to

2. The administration of a company & trust has alot of paperwork involved & will cost a fair bit to set up (Laywers & Accountants fees), i'd think around $5k to set up & $2-3k a year ongoing?

3. The potential loss of imputation credits to enter into this arrangement

4. Under the scenerio above, you would have a debt owing to you by the company, this would be better re-structured into the Trust, re gifting duty purposes (your Accountant should have some thoughts around this)

5. You may be better off putting your "investments" into a trust, & having the margin loan & trading stocks in an LAQC, with just you as the shareholder.

(Hopefully National does align the top tax rate to the company/trust tax rates so ANY dividends paid to you are taxed at source, & there is no further liability due to having income at the current top tax rate)

6. If your wife was to maintain the paperwork/administration, there is the oppportunity to pay her a nominal salary (untaxed) to utilise the imputation credits, although this has to be "justified".

I'll give it some more thought, but i'd run that past your Accountant & see what they think will suit your situation best.