What is a Look Through Company or LTC? That's a good question. ​

Basically, it's the replacement for the old LAQC (Loss Attributing Qualifying Company).  At tax time, you look through the company to the shareholders, and distribute the income (or losses) to them.

How is it different from a normal company then?
A "normal" limited liability company can pay dividends and pay salary to its shareholders. Whatever is left after that is what it pays tax on.  A LTC distributes all the profit (or loss) to the shareholders.  It's more like a partnership, but with a limited company wrapped around it.

How do you figure out who gets what?
The income distribution is based on the shareholding. So if you have a 90% shareholder and a 10% shareholder, then the 90% shareholder gets 90% of the profits/(loss) and the 10% shareholder gets 10%.

So, what's the point of that?
Many people use LTCs to own their residential rental investment property.  A common strategy that financial advisors recommend is to purchase negatively-geared rental property (negative gearing means that the expenses are more than the income).  The shareholders have to top up the mortgage with their own money, often $50-$100/week.  The LTC then has losses at the end of the financial year.  These losses are then distributed to the shareholders.  In a rental property scenario, rental losses can only be offset against other rental income

Can you give me an example?
Sure.  Mr Smith owns a rental property in his own name, which generates about $11,000 of income (after expenses) per year; he also earns $130,000 per year before tax. Mrs Smith works part-time.  They set up a LTC and it purchases a negatively-geared rental property.  They put about $125 a week into the LTC to help pay the mortgage.  Mr Smith has 99% of the shares, and his wife the remaining 1%.  At financial year end (31 March), there are losses of about $10,000. Mr Smith gets 99% of these to offset against his wages.  The formula is

Wages + rental income - LTC losses = net income

In this case, it would be

$130,000 wages + $11,000 rental income - $9,900 LTC loss = $131,100

Mr Smith paid $33,820 in PAYE tax, based on his salary of $130,000.  Because he can utilise the LTC rental loss and offset it against his personal rental income, he only has a small amount of tax to pay at the end of the year ($363).

See this article for more info and examples of how losses work.

How is this different from a partnership?
Another good question. See this article for an explanation.

I'm convinced. How do I get a Look Through Company setup?
Simple! Fill in the form here and click Submit. We'll send you an invoice, and within 2-3 working days your company should be incorporated.  Easy and painless.

I've got a few more questions.  Can I talk to somebody?
Sure.  Contact us today.

Here are our 6 tips for buying a holiday home:

Want to talk about tax? Wealth creation? Planning for retirement? Contact us on 099730706 line 2 or email us.

Investing in property in New Zealand can be a good opportunity to generate rental income and potentially earn long-term capital appreciation.

​Here are some things to consider when investing in property in New Zealand:

1. Research the market: It's important to research the local property market to find out what types of properties are in demand and where they are located. You can also research the historical performance of the market to get an idea of how the value of properties has changed over time.
2. Consider the location: The location of the property is a key factor to consider when investing. Look for properties in areas that are likely to experience strong demand, such as those close to amenities and transport links.
3. Determine the type of property: There are different types of property you can invest in, such as houses, apartments, townhouses, and commercial properties. Consider the type of property that will best suit your investment goals and budget.
4. Calculate the costs: Investing in property involves upfront costs such as the purchase price, as well as ongoing costs such as mortgage payments, insurance, maintenance, and property management fees. Make sure you have a clear understanding of all the costs involved so you can budget appropriately.
5. Seek professional advice: It's a good idea to seek the advice of a financial advisor or property investment specialist before making any investment decisions. They can help you understand the risks and potential returns of investing in property and provide guidance on the best course of action for your specific circumstances.

Contact us on 0800890132 line 2, or via our contact form. We'll help you evaluate your situation and connect you with the right people.  

​Perhaps you’ve been thinking "I want to buy property," but you’re worried about your debt. Here are 5 debt pay-off strategies!  Before you start looking for a real estate agent, scheduling property tours, putting down offers, it’s time to get rid of your debt once and for all - or reduce it as much as possible. When you’re ready to invest in real estate, EpsomTax.com can help you along the way! In the meantime, these tips will help you tackle your debt burden.

As you browse local listings, you might be worried that the high asking prices will prevent you from breaking into the housing market. But if you think outside the box, you might be surprised by your options. For example, you could consider buying an apartment, purchasing a home with space for a “mother-in-law” suite that you can rent out, or buying a home “as-is.”
 
If you choose to buy a home “as is,” you’ll save money upfront, but you’ll also be responsible for fixing any problems after you move, like structural issues, eliminating mold and mildew, patching leaks, and getting rid of pests. A seller will not be responsible for fixing problems like this.

​If you’re a business owner, there are a few things you can do to increase your take-home pay and increase your home buying budget. For instance, by structuring your business as a Limited Liability Company (LLC), you can take advantage of additional tax breaks. With LLC status, you can also rest assured that your personal financial assets will be better protected if your business runs into economic trouble. Before you start gathering your paperwork for filing, check the rules in your area for forming an LLC.

 What if you’re juggling multiple loans or forms of debt? You might be wondering which debts you should pay off first, or you might stress out about missing payments. Consolidating your debts can help you avoid these pitfalls. If you’re interested in consolidating your debts, Nectar recommends calculating your average interest rates first, because you’ll want to ensure that your debt consolidation loan interest rate is either equal to or lower than this figure.

If you’re struggling to make all of your payments on time, you may want to call up your creditors and talk to them about setting up alternate payment plans. But you’ll also want to explore a few ways that you could increase your income. Picking up a side-hustle is a great way to pay off your debts on a faster timeline and make your payments more comfortably.
 
Which side hustle should you pursue? Unity recommends walking dogs, joining a ride-share app, doing odd jobs for your neighbors, or becoming a mystery shopper.

Overall, savvy budgeting is the key to paying down your debt. You need to make sure that at the end of the month, you have plenty of money left over after paying all of your necessary bills. If you know that you’ve been overspending, it’s time to start tracking every penny you spend. Try tracking your spending carefully for a month, and then sit down to go over everything you spent money on. Where can you cut back? Is there anything unnecessary that you were purchasing that you can eliminate from your budget completely?
 
Dealing with debt can be frustrating. But with the right approach to personal finance, you won’t be stuck with your debt forever. By saving carefully, looking for additional sources of income, and budgeting well, you can pay off your debts and buy your dream home!
 
Are you interested in real estate investing? Turn to EpsomTax.com to get started! Fill out the contact form on our website today to get in touch or call 099730706 line 2

Money vs Your Emotions: What You Need to Know! Amazing insights from Lynda the Money Mentalist! 

With the government's shock introduction of laws slashing interest deductions on existing rental properties, where can you as an investor put your money? What will get you the best return while still maximizing tax deductions? We present 9 strategies: 

 1. MORTAGE HOLIDAY: In other news, with the OCR dropping to (and staying at) 0.25%, your bank should be passing on rate cuts for any floating loans, and it is worth looking at existing loans to see if you should break and re-fix or extend the term. Break fees are tax-deductible. Ask the bank or your mortgage advisor to do the calculations for you, or use this tool here. You might also want to look at a mortgage holiday, but just be aware that this will increase the loan,^ but it will buy you some time, so in the big picture, may be worth it. We suggest you only do this if you really need to.

Please see this detailed page with info about mortgage holidays, including links for all the major banks to apply for one. See also our blog post with 4 options for your mortgage to improve cash-flow right now

​2. INTEREST RATES: Check with your bank re break fees on your loans, and look at whether the math adds up to break and renegotiate one or some loans at lower interest rates.

3. RENTS: Rent increases are worth considering, as you can now only increase the rent once a year.

4. PAYMENTS: Of course, cash-flow is king, and in this environment, we suggest asking your suppliers if you can start paying in smaller regular installments, rather than bigger sums. This will help reduce the impact of having less cash coming in. EpsomTax.com group offer interest-free time payment plans to all customers as a matter of course; please contact us to arrange this now.

5. INVESTING: This might also be the time to look out for housing bargains - see this article about timing and buying.  If you can get a good deal on a cash-flow positive rental, that's going to introduce some $ into your portfolio. Heads-up: Banks are deluged with lending applications, so getting mortgage approval is slow

6. OTHER RESOURCES: Xero.com have provided a page with links to educational content. You don't have to be a Xero user to access all of it. Webinars include managing stress, resilience, business continuity and so on. 

​What good news is there for the coming weeks and months, in view of the COVID-19 pandemic and its effects on the economy? 

Government policy changes include:

• Increasing the small asset depreciation threshold to $5,000 for the period 17/03/20 to 16/03/21.  It will return to $1,000 for 2021/22 onwards
• Giving Inland Revenue the discretion to remit use-of-money interest (UOMI) for customers significantly adversely affected by COVID-19. Affects all tax payments due on or after 14 February 2020. (There are some conditions, see here for more info. For those who don't qualify; tax pooling is still a cost-effective option.)
• Increasing the provisional tax threshold from $2,500 to $5,000 i.e. if your 2019/2020 income tax was under $5,000, you are not a provisional tax payer for 2021 year
• Allowing 2% depreciation on commercial and industrial buildings from 2020/21. 
• Giving wage subsidies or leave payments in some situations.* Find out more HERE. 
• Business Finance Guarantee: loans for businesses with annual revenue up to $80 million can apply for loans up to $500,000, for up to three years. Click here for more info.
• COVID-19 small business cashflow loans:  10k minimum loan, 1 year interest-free, no repayments till year 3, then 3% interest p.a.  There are some fishhooks if you miss a payment, so be aware of your responsibilities if you apply and are accepted. More info here.  Apply via the IRD website (use your myIR account)

* The wage subsidy and leave payments are NOT subject to GST - an Order in Council was passed to treat it as exempt (Section 5(6E)(B)(iii GST Act). The wage subsidy paid to the employer is not taxable; it is excluded income under section CX 47 of the Income Tax Act 2007; it is also therefore not deductible when paid by the employer as part of wages to employees. The payments made to employees are taxable for the employee and subject to PAYE, KiwiSaver deductions, Student loan etc in normal way. The same is true for self-employed persons: it is taxable income. NB: you only need to show a 30% revenue reduction for a single 4-week period to receive the full 12-week lump sum; you should be able to show that you took active steps to mitigate the financial impact of COVID-19, which could include drawing from your cash reserves (as appropriate), activating your business continuity plan, making an insurance claim, proactively engaging with your bank or seeking advice and support from either the Chamber of Commerce, a relevant industry association or the Regional Business Partner programme.

^ How it works is that the principal payments temporarily stop and the interest is added to the mortgage

Are you thinking about buying a rental property but not sure if now is the right time to dive in?  

There’s nothing like a worldwide pandemic to give you wobbly legs at the thought of making a big financial investment! It may seem like a precarious time to buy a rental property due to Covid-19 and political uncertainty around landlord requirements. However, there are other drivers which may indicate that it is a good time to enter the property market or expand your portfolio.  Let’s take a closer look! 

Something to keep in mind when thinking about purchasing an investment property is any new and ongoing legal requirements on landlords. 

For example, the new healthy homes standards have been introduced for rental properties in New Zealand, to ensure tenants have access to warm, dry and safe homes.  These standards set specific and minimum requirements, including heating and insulation for rental properties. This means any property you purchase will either need to be up to specification when you buy it, or investment will need to be made to get it ready for tenants.