Tax avoidance?

Our Experts Answer:

The issue faced is that interest incurred by you to fund your personal acquisition will be non deductible. Interest borrowed by an entity to buy an income earning asset though will be deductible. Tax avoidance is loosely defined to include any transaction entered into to reduce the incidence of tax. Taxpayers though, are entitled to arrange their affairs to minimise tax. The type of restructure you are contemplating is relatively commonplace and to date, I have not seen evidence that would suggest this type of restructure is considered by Inland Revenue Department to be tax avoidance. With all related party land transactions though care should be taken to ensure assets are transferred at fair market value. It is also helpful if commercial reasons exist to undertake the restructure aside from just tax reasons. This may include estate planning and protection issues that should be contemplated as part of any overall restructure plan.