Rental Properties

New Zealanders have a fondness for buying property as an investment. However care must be taken to ensure the most efficient ownership structure is being used for maximum tax advantage.
Rental properties can be purchased in your own name, in joint names, in a Company or in a Trust. It is strongly advised that you discuss the purchase with an accountant before you sign the sale and purchase agreement.
If a property is negatively geared (you have a large loan and the rent does not cover the interest payments) it will make a rental loss, the best ownership structure will most likely be purchasing it in a Look-Through Company. The loss will then be able to be offset against any other income that may be derived in your personal names.

If the rental property is likely to make a net profit, then an ordinary company may be the way to go, or even a partnership where the income can be split between the partners.

If you wish to protect the asset from creditors, or a possible relationship breakdown then a Trust could be a better structure for owning the property. Any profit can be allocated out to the beneficiaries if they are on a lower tax rate.

As you can see the ownership of the property has an effect on your taxation situation. It is paramount to discuss any possible purchase with an accountant early on. Accounting Tasman Ltd have many rental property clients and are able to assist you in this area, and will also prepare the rental statements and the relevant income tax returns.




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Richmond, Nelson.