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Another important reason
for discussing a proposed purchase with an accountant is to ensure
that the maximum income tax advantage of both the purchase and
operation of the business are obtained. For instance, a particular
point which is not always considered is the financing of the two
contracts. Interest of any borrowings in connection with the purchase
of the residential unit would not be tax deductible. Accordingly,
where possible, purchasers should ensure that borrowings are made
against the business contract. There is also the question of the names
which should appear on the respective contracts and advice on capital
gains tax.
- For the purpose of a mortgage up to
50% can be borrowed of the total purchase price.
- There must be sufficient, income
from the business to repay a loan, and repayments should not exceed
30% of the net income for at least two months ahead.
- It is very important that the
manager has enough funds in reserve for outlays such as wages, and
other day to day expenses for at least two months ahead
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