Strategic Asset Protection and Tax Efficiency: A Client's Commercial Property Triumph

Introduction

In a recent success story, we delve into a client's achievement of not just purchasing a thriving business but also acquiring the commercial property housing the new venture. The discussion revolves around crucial aspects such as asset protection, lending structure, and borrower-security owner alignment. 

The client, an owner of a successful business and three residential properties, sought to safeguard assets while expanding the business. To mitigate risks, asset protection became paramount. Establishing a family trust for the client and their children as beneficiaries aids in tax reduction, leveraging lower tax rates for the household. 

Optimizing Lending Structure 

Crafting an effective lending structure is crucial. Leveraging residential property equity for most lending proves advantageous, as it incurs lower interest rates compared to commercial property loans, typically 2% lower. This strategic allocation optimizes interest costs overall. 

Borrower and Security Owners Structure 

Aligning borrower and security owner structures is pivotal. In loan applications, mirroring the borrower with the security owner's identity ensures coherence. Considering the client's property ownership - one owner-occupied and the rest under LTC - channeling new lending through LTC secures better interest rates and potentially increased lending opportunities. Anticipating future financial reporting concerns, a lending agreement between the client's personal name and LTC has been devised. Redirecting interest repayments to the trading business reduces company profits, enhancing tax efficiency. 

Providing Comprehensive Financial Planning 

Beyond loan amounts, the focus is on delivering holistic planning and insights to clients. This case exemplifies the added value of comprehensive strategies for asset protection, tax efficiency, and reduced loan costs. 

Conclusion 

For those interested in purchasing a business or commercial property, consulting a professional is essential. Maximizing asset protection, tax efficiency, and minimizing loan expenses are achievable with the right guidance.  

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Disclaimer: The content in this article are provided for general situation purpose only. To the extent that any such information, opinions, views and recommendations constitute advice, they do not take into account any person’s particular financial situation or goals and, accordingly, do not constitute personalised financial advice. We therefore recommend that you seek advice from your adviser before taking any action.