The Tax Lady
"One lady you can't live without"

Frequently Asked Questions

1. What expenses can I claim for my rental property?

• Legal fees up to $10,000
• Rates and Insurance
• Interest paid on funds borrowed to purchase your property
• Property Management fees & commission
• Repairs and maintenance (unless they improve property)
• Motor vehicle and / or travel expenses to inspect the property
• Mortgage repayment insurance
• Accounting fees
• Depreciation

2. Business structure - which one should I use?

Sole Trader

Advantages

• The simplest and cheapest way to start in business.
• Any income is taxed at the progressive rates of individual tax
• Disadvantages
• Does not provide limited liability. One is personally liable for the debts of the business. Personal assets can therefore be at risk.
• Income over $70,000 is subject to a 33% tax rate.
  
  

Partnership

Advantages

• More than one business owner - therefore more skills, experience and management expertise available.
• Low start-up costs companies to Limited Company.
• Tax is paid at personal rates.

Disadvantages

• No limited liability. Partners are liable (jointly and severally) for the debts of the partnership. This means that one partner is liable for debts another incurred on behalf of the partnership.
• Income distributions may be inflexible.
• No protection for partners assets which may be seized to satisfy partnership debts.
• Losses are deductible against other income, subject to certain loss offset limits.
  
  

Limited Company

Advantages

• Once a company name is incorporated no other company can be registered with the same name.
• It is a stand-alone entity - separate from the owners.
• Provides limited liability, although most lending institutions will require personal guarantees.
• Permits splitting of dividend income to shareholders
• If the company is a 'qualifying company' dividends will either have imputation credits attached which will reduce or eliminate the individual's tax liability.
• If the company is also a 'loss attributing qualifying company' tax losses can be attributed to shareholders.

Disadvantages

• Does not protect directors from personal liability. If a director continued trading when the company was insolvent one can be held to be personally liable for the debts of the company.
• Costs of establishing and administering are higher.
• Business losses have to remain in the company unless the company is an LTC.
  
  

3. When do I have to keep a vehicle logbook?

Sole-traders and partnerships may have to run logbooks if the vehicle they use for business is also used for private running. A logbook is required to be kept for 3 months every 3 years. You start with the kilometres at the start of the 3 month period then record the number km travelled that day and the reason for the trip. At the end of 3 months the total private km divided by the total km travelled during that time will give you the private use percentage eg.

If your situation changes within the 3 year period after that then you will need to do another log book. Companies do not have to do a log book, they are liable for FBT instead. Shareholders are deemed to be employees of the company and are therefore subject to FBT for cars available for private running.