Ownership restructure

Our Experts Answer:

Restructuring now needs to be carefully considered against the backdrop of the five year bright line test and tax avoidance. The bright-line for the property re-sets if a company you are associated with buys it from you.

You haven't stated what your motivation for this change is but if it is to increase gearing on the property you need to ensure that the basis for the restructure is commercial and not solely self serving from a tax perspective. If, for example, the property is jointly owned now and the company is jointly owned by the same people, what is the commercial basis for the change ?

Tax losses on rental properties are also now set to be ring fenced so restructuring to create losses that you may not be able to offset against other income may now not be wise if it means five more years to run under the bright-line. So, overall, my suggestion is to get really clear on what advantages you see in doing this and weigh them carefully against the ring fencing and bright line test before progressing.