Arti Chand from Arti Chand law explores key considerations when looking at the tax and legal implications of different structures for CoHousing.

1. Arti Chand
arti@actaxlaw.nz
www.actaxlaw.nz
+64 21 922 718
Structures - Tax & Legal
Considerations

2. ❖ What is the purpose of the land acquisition?
❖ How many people are involved?
❖ What is the end goal?
❖ How do you want the ownership structure to look like?
❖ How are you getting funding for the project?
❖ What is the understanding that all parties have re the project?
❖ How do you intend to resolve issues such as need for more funding?
❖ Who will manage the project?
What structure to use?

3. ❖ Simplest structure - proportionate, undivided share in property
❖ The undivided share can be left to a beneficiary on death
❖ Agreement can be tailored to the needs.
❖ Each co-owner has own income tax liability/obligations.
❖ GST - if the co-ownership is formal and regulated, then it can register for GST as an
unincorporated body. Mere co-ownership is not sufficient.
Tenants in Common

4. Joint Ventures
❖ Unincorporated vs incorporated
❖ Can make unequal contributions
❖ Usually designed for a specific purpose
❖ Each JV party is responsible for their own income tax
❖ GST registration: JV can register

5. Partnerships
❖ Equal contribution (usually) and defined share in ownership
❖ Partners are jointly and severally liable for all debt (including taxes)
❖ Partnership files an income tax return but partners also have to file their tax return and
include their partnership share
❖ GST: partnership can register
❖ Specific rules when partners enter or exit the partnership for tax purposes
❖ Partnership and partner are “associated” for tax purposes - need to consider land taxing
sections

6. Limited Partnerships
❖ Limited Partner - provides funds
❖ General Partner - does the work
❖ Limited liability
❖ Need a limited partnership agreement
❖ Need a general partner shareholders agreement - if general partner is a company
❖ Very popular structure internationally
❖ Treated as a partnership for tax

7. Company
❖ Easiest to set up - complicated if not set up properly!
❖ Must have a shareholders agreement
❖ Company is a separate legal entity but directors must know their duties
❖ Issues with shareholder changes for tax
❖ GST registration - company registers

8. Trusts
❖ Must have a trust deed that truly encapsulates the purpose of the trust
❖ Trust legislation is changing - more disclosure requirements for trustees
❖ Trustee - has a fiduciary duty - must understand the duty and the terms of trust
❖ If the trust is to be a charity - must ensure that the trust deed is appropriate and approval
from charities services is required
❖ Land trust - land transferred to a trustee for the benefit of beneficiaries
❖ Trust pays income tax - trustee or beneficiary
❖ GST registration - trust registers
❖ Community Land Trusts - when land is developed/held to provide affordable housing to the
community
❖ Income tax exemption: community housing provider ($80,000 or $130,000 joint)

9. Unit Title
❖ Ownership of a defined area and co-ownership of shared spaces
❖ Managed by a “body corporate” type entity for shared areas
❖ You must know all the rules - costs, insurance, maintenance etc
❖ Body corporate can register for GST - there are specific rules

10. Tax considerations
❖ Land taxing provisions
❖ Bright-line test - residential property disposed within 5 years of acquisition
❖ Intention to sell
❖ Land development/dealing/building business
❖ Associated with a land developer/dealer/builder
❖ Minor development within 10 years
❖ Major development

11. GST considerations
❖ Taxable activity
❖ GST registration threshold
❖ Invoice/payments basis
❖ Zero-rating of land transactions

12. Questions?