All Topics / Legal & Accounting / Businesss renting shed off ourself

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  • Profile photo of gags327gags327
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    @gags327
    Join Date: 2008
    Post Count: 64

    I am just wondering from a finance point of view what would best suit our situation. We have a mortgage on our property of around 600 a week. we have a business were we rent a storage shed for around 350 a week. This is purely storage so doesn’t need to be situated in town etc. Would we be better off buying some acreage ( as we would rather live on acreage) either with a large shed or build a large shed off for the storage that we are currently paying 350 a week for ( which isn’t ideal for us either and will eventually need to be upgraded)? Would our business be able to pay a portion of our mortgage? or would we be better off renting some acreage with the business paying a portion of the rent? I am thinking there would be income tax implications if we owned it as well as many more I imagine.

    Bangers
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    @bangers01
    Join Date: 2014
    Post Count: 23

    Can your business buy the house and rent it to you?

    Profile photo of gags327gags327
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    @gags327
    Join Date: 2008
    Post Count: 64

    I hadn’t thought of that, that is a good idea. Probably not right at the moment but maybe 12 or 18 months time.

    Profile photo of gags327gags327
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    @gags327
    Join Date: 2008
    Post Count: 64

    If I was to buy a property in our name can the business pay for the shed and improvements etc?

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    A business is not a legal entity, and you cannot contract with yourself. But if the business is being operated under a company structure the company could rent from a property owned by you/you and spouse/spouse.

    But what are the consequences – if the property is your main residence it could then be subject to CGT as it is now income producing. The company may be able to claim a deduction, but the rent will be income to you. This may result in tax savings overall or extra tax depending on the situation. There are special tax rules relating to related party transactions.

    Also consider that there may be some good strategies involving a SMSF owned property being rented by a company/you running a business.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of gags327gags327
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    @gags327
    Join Date: 2008
    Post Count: 64

    Thanks Terry, some things to consider. The business is under a company structure. How would renting a property compare? Say if us and the company were to go 50/50 in the rent for example?
    Also how does CGT work if say for e.g. we owned the property for 10 years and say for the first 5 years we were collecting rent from the business?

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    If you went 50/50 you would each have your own expenses and whether the rent would be deductible or not would depend on what you used the place for.

    If you rent out your main residence the portion you rent out will be subject to CGT.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of gags327gags327
    Participant
    @gags327
    Join Date: 2008
    Post Count: 64

    What are the implications regarding CGT if we purchase a property as a PPOR and then were to subdivide it down the track

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