Ocean in the Pond: How the Masters Can Teach You About Sailing Your Business Out of the Sea from the Lake and to the Ocean

My boss successfully refinanced his own properties under his investment holding company. What happens in accounting, is created a loan account on the balance sheet and money drawn by the director as asset in the balance sheet. The problem is the bank agreed to pledge the property and release the loan without transfer of title. It created another problem that his audit report could not recognise as property but amount due from directors. This has the effect of deemed interest income and subject to tax on a yearly basis.

Under income tax act, a company shall derive interest income from loan or advances granted to the company director. The sum of the monthly interest is determined at the end of the calendar month and average lending rate of commercial banks.

A trust deed is a document sometimes used in real estate transaction that comes into play when one party has taken out loan from another party to purchase a property

There are two method

1st is to novate the loan agreement with director resolution so that accounting entries can be reversed. Report rent income and interest expenses in personal

2nd method is to create a trust deed agreement between the boss and the company and pay the stamp duty, so the property would be recorded in the balance sheet.

My boss would rather opt for the 2nd method because it feels better this way.

His scenario is worse with the 1st method, the reason is he transfers profit from another business to pay back this loan will cost him a lot of taxes. Now he is glad with the structure he saved a lot of tax and trouble.

Boss, your scenario may be different but similar issue, contact me for private coaching to find your desired result then consult lawyer and accountant.

Link to my book:
NEXT LEVEL BOSS - THE SECRETS: https://www.cfostan.com/next-level-boss-the-secrets
Ocean in the Pond: https://amzn.to/3tJCIBo

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