Hi Terryw – WOW – thanks for such a detailed reply!!!
Overseas tax: if I did this, I'd obtain a private ruling beforehand; I'm not interested in anything illegal! My situation is extremely unique – my income is 96.5% untainted, and my business is a PE: 100% located in and automatically operated from overseas – qualifying me for the "Branch Profit" treatment (section 23AH) or the summary here: http://tinyurl.com/288kbed – the treatment applies equally to listed and unlisted countries, with the exception that the term "Permanent Establishment (PE)" is defined by the foreign countries legislation in listed countries, rather than by our legislation (clarifyable by a private ruling) for all others.
I think this is not relevant however; profits that accumulate in my business untaxed can only "get out" via unfranked dividends or PAYG, so they end up getting taxed as normal anyhow. My assumption is that if the "profits" get spent by the business on house construction – they're not "profits" anymore – they instead reduce my assessable income down to zero – so it makes no difference whether the money was non-assessable in the first place, if there's none left over to be assessed on at the end?
Ownership: the land is owned by a discretionary trust presently – my wife and myself are the beneficiaries. Interesting to hear about Cummins!! Stamp duty on transferring this doesn't bother me too much; I can work out how much that will cost, and I am hoping to be able to work out how much benefit might come from any transfer, so I'll just choose whichever option "costs less". (eg: If, hypothetically, it's possible and legitimate for us to pay no rent on the house, in exchange for the business being allowed to construct on my Wifes land; this might save us $8.5k/year in the tax on the rent we're not having to "pay". That's in the same ballpark as stamp duty anyhow, so that small upfront cost saves us loads in long term expenses. I said "hypothetically" deliberately – I'm pretty sure this exact situation would *not* be legitimate; but I'm hoping to find out what *would* be legitimate, and how much it would cost).
US company: I don't have any established US structure – merely "servers in racks." That said – should I *be* sued by an American, and loose, I'm of the vague understanding that if I merely ignore it and choose never to go to America – there's nothing they can do about it. I say "Vague understanding" – this advice was accurate (and cost me $30,000 in US legal fees to obtain) 8 years ago. I'm *assuming* it's still current.
Terryw wrote:
If the company is providing you with living space then there are fringe benefit issues.
Can you elaborate on what these issues are, and in particular, can you think of situations where it would be permissible for the business to charge the tenant less rent (in some way that avoids the tenant or business paying extra tax of course)? Do you know any good "fringe benefits for dummies" resources I could peruse?
CGT exemption loss: Yes – I'm aware of this drawback – and the even bigger problem of the entire sale amount being "stuck" in the business and subject to full marginal tax if "extracted" later.
PPOR and land tax: I'm a newbie, and didn't even know land tax existed. It seems that in QLD, no tax is payable for land worth less than $350K (companies) or $600K (individuals). I assume their idea of VOLA roughly matches the councils idea (on my rates notice), so I'm way below those thresholds already. Thanks heaps for mentioning this one!
Terryw wrote:
There may also be corporation Act issues such as directors duties not to personally profit at the expense of the company etc.
Yikes! This sounds like a deal-breaker. Do you know more about this? Myself and my wife are 50%/50% company shareholders, and I'm the director. Do these "Issues" apply to private companies? By "Issues" – do you mean that ASIC or someone could sue me (deal breaker!), or, do you mean that a if a shareholder sued me – I'd loose? (non issue – I'm not going to sue myself). Is this anything that anyone could "find out about" if neither shareholder ever complained about it?
Terryw wrote:
For the business question it would be the party contracting with the buyer who gets the income.
Interesting answer; I own a patent, which could relatively easily be transferred to a new company to build the house, so licence fees might make sense – and that might hopefully provide some asset protection too.
It sounds like you have a great depth of experience. I'm very grateful for your answers – thanks!!!!
idea of mine when I raised it.
idea of mine when I raised it.
