If you are thinking of investing in property, it could prove beneficial to consider holding it in a trust or a Loss Attributing Qualifying Company (LAQC).
Wednesday, February 23rd 2005, 4:06AM
by The Landlord
Brookfields senior associate Sandy Donaldson says LAQCs are particularly relevant for those on higher incomes (over $60,000 a year) buying investment properties. Using an LAQC to own property can help reduce your liability for personal tax, she says.
So how does an LAQC work? First of all, an LAQC is specifically designed to hold investment property, it is not an appropriate means to own any home you're going to live in. It can best be described as a limited liability company that can transfer losses to its shareholders, who generally are you and your partner who have become shareholders of that company.
The company can claim usual property expenses, including the interest component of the mortgage, rates, body corporate fees (if applicable), repairs and maintenance as well as depreciation.
"If, at the end of the financial year, after taking into account those expenses, the company has made a loss, the shareholders can reduce their income by the amount of that loss,'' Donaldson says.
"This means you can end up making a loss on the property, which is offset against personal income for tax purposes.''
