Best ownership structure?

Our Experts Answer:

Dear Chris, the key piece of information missing from your statement of facts is the amount of debt you have associated with your current home. If you have substantial equity in it a restructure may be required to make the arrangements tax efficient. This is because you intend moving into the home that you are about to debt fund and rent the home in which you presumably have some equity. To the extent that the debt for the new purchase funds your private and domestic living the interest is non deductible. One possible structure would be to sell the old property to a LTC that debt funds the purchase. This releases your equity and enables you to apply it to the new property purchase. With regards the new acquisition my advice would be to plan the structure around the properties predominant purpose. If it is primarily a home for yourself use an ownership structure appropriate for this, this could include a trust or personal ownership but not a company. The fact that you intend deriving rental income from your new home with boarders and ultimately by creating self contained accommodation will trigger some tax compliance issues. The IRD guidebook on rental income IR264 contains a useful summary of the rules associated with boarders, flatmates and self contained units in homes.