Should I purchase my second investment through LAQC?

Question from heather updated on 23rd April 2009:

We currently have an LAQC with one negatively geared property within it. We are looking at securing another investment property that is positively geared. Should this also be purchased under the LAQC which we were lead to believe was predominantly for losses/tax benefits? Or should we keep this separate? Look forward to your reply.

Our expert responded:

You are correct, an LAQC is predominantly used for tax benefits. However, with a negatively geared property, even if it's owned under an LAQC, when you lose $1, you still only get back 33c in tax, assuming a 33% marginal tax rate, which means that you've lost 67c. So, if you can buy a property that would reduce the loss of the 67c, then I would say go for it and put it into your existing LAQC.

One point you may not have considered is that owning that property separately from your LAQC would also mean another lot of compliance costs, potentially doubling your accounting fees. By putting the new property into your existing LAQC, your accounting fees will increase a bit, but nowhere near double the cost of running two sets of accounts.

Kenina Court is a director of Acorn Solutions Limited, an accounting firm dedicated to working with clients to help them create wealth.  She is an avid property investor, entrepreneur and seminar presenter on asset protection and wealth strategies.



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