Should we restructure into an LAQC?

Our Experts Answer:

A general principal of good tax management is to retire personal debt in priority over your deductible investment debt. Restructuring the investment property into an LAQC that borrows interest only money to buy the property may be one way to achieve this. You must be careful though as any transaction or arrangement that is entered into to avoid the incidence of tax as it's primary motivator is illegal tax avoidance.

It is a fine line between tax efficient restructuring and illegal tax avoidance. It is more likely to be problematic if the owners of the LAQC are the same as the properties owners now. If there are other non-tax driven reasons for the restructure it is more likely to stand scrutiny. For example, if your home was restructured into a trust at the same time then the rental property sale to the LAQC would simply be a by product of a greater overall estate planning exercise.

Mark Withers and his team at Withers Tsang & Co specialise in advising on property related transactions, valuation and restructure services and tax planning.