Who Would Buy Leasehold Land?

Thursday 21 January 2010, 2:51PM
By Terry Cuthbert

Given the governments stance on further taxing investment property and raising GST, would it not be wise to seek a further Tax write off against your rental investment properties? If you currently have a portfoilio of rental properties would it be wise to sell the freehold to another entity eg. Family Trust or a private company you set up and create a leasehold ground lease so you in fact have another tax offset? In creating a leasehold tenure is not that difficult but writing a up a ground lease should be set up right.

1. It should always be in perpetuity (which means you will always have a another roll over period)

2. The term of lease which in a normal Glasglow lease, it is for 21 years before it is rolled over in perpetuity.

3 The rent reviews, nomally every 7 years you will increase the lease payment on the land only.

4. The percentage of lease increase normally 5 to 6 per cent of the unimproved land value.

Leasehold is fully tax deductible so you get another tax offset on your investment. If your family trust own the freehold they recieve a rental payment which they pay tax on.

This is just an idea that you should get advise on from your accountant. The number one rule when trying to sell your leasehold property is do it at the beginning of the lease rent review so your purchaser has a good 7 years before the lease payments go up.