ARE TAX BENEFITS A GOOD REASON TO CHANGE COMPANY SHAREHOLDINGS?

Nov 14, 2016

Should you change the shareholding in a company to get better tax results?

SCENARIO

You and your significant other each own 50% of the shares in an LTC. It owns negatively-geared rental property.  At tax time, you get your 50% share of the loss, which generates a nice tax refund.*

Previously you both earned about the same, but now there is a child in the mix, and one of you is working less as a result, and earning less as a result.

Suddenly that 50/50 company shareholding doesn’t look so good. Should you change it to 99/1 to get better tax refunds?

CONSIDERATIONS

The short answer is no.  If you do anything with the motive to purely pay less tax, then you leave yourself open to being accused of tax avoidance.

What to do then? Well, there may well be economic reasons for the change, which had not previously been considered. When you take these into account, any so-called tax benefits could well become purely incidental.  

As each situation is different, it’s not practical to outline these here, so please feel free to contact us to discuss.

​You may also wish to read a related article: Changing Shares in LTCs: Considerations


* From 1 April 2019, tax losses will no longer flow through from LTCs that are residential land rich.  Please contact us for advice on how to get the best results from your portfolio, build wealth and minimise

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