Hi All,
This is my first time to pu tin a posting.
I am currently doing my best to look around for positive geared propery at the moment but having a lot of trouble finsing any. I have found some around regional areas but would like to try and find someting a bit closer to hom to start off with. I have been finding a few properties lately which would mean I would only have to contribute around $3K a year and I beleive this neagtively geared property would not be as bad as a lot of them out there where you need to hand out a lot more money.
However my question is….
Is there a model to work off that you can work out what the ideal property price and rental income is for your wage to get the best tax benefits?
I’m finding it so hard at the moment to find a postive cash flow property, and while I start to get back into IP again I would be happy to start with negative gearing while I get settled.
Can anyone help me?
Cheers
peninsulainvestor
Not aware of any model/formula etc, however you can try this and see how you go.
1. Go to http://www.ato.gov.au/scripts/taxcalc/calc_standard_hire.asp
This allows you to calculate your tax payable based on the income you nominate for a given time period (ie weekly, fortnightly, monthly or quarterly)2. Gross it up to an annualised figure ie if your tac bill is $1k per month, multiply it by 12.
3. Do 1 & 2 again, after you have determined what your deductions are. Therefore your taxable income (inclusive of deductions)
4. Minus the results you get in 3 from 2 and you have the reduction in tax for the year.
As to what is the best price/rental income to get best tax benefits. I would rather choose the property based on potential capital growth & rental demand. Let the tax be a benefit which makes this ‘future’ property easier to acquire/manage.
However, to answer your question directly, the maximum benefit you receive is when you are on the 48.5cent marginal tax rate. Therefore, as your deductions increase, with more IP’s, the benefit falls as your taxable rate falls from 48.5c in line with your taxable income.
I have probably told you the bleeding obvious haven’t I? Trust my ramblings have helped.
James
Peninsula investor
$3K a year is not too bad – provided you have the money, and have done research on the capital gain potential. To ‘maximise’ the tax you will get back you want to make sure that the building was built post 1985, and/or that there have been renovations done recently that will have good depreciation in them. This is the way to ‘lose’ money, but not to have to pay for it yourself.
Cheers
MelHi PeninsulaInvestor,
Another possibility is to purchase an investment property analysis software package like PIA.
Derek
[email protected]Hi All,
Thnks for the great replies!
All very much appreciated.In regards to the software PIA. Im assuking that stands for something for the actual name of the software. eg Property Investment A…..? Or is it actualy called PIA?
In regards to the depreciation and a building being Post 1985, I dont understand how this effects everything but I will do my research and find out why.
Thanks again everyone!
Peninsulainvestor
Peninsula,
PIA – Property Investment Analysis. A downloadable trial version of PIA is avalable at http://www.somersoft.com.au – as can be appreciated the trail version has key figures like purchase price fixed but it does enable you to play with some of the other key numbers so you get an idea of what it can do.
There is a comprehensive manual that goes with it. If you want to go down this line then I recommend you purchase PIA – Personal Professional package (I think that is what it is called from memory)
The age of the property determines the amoound of depreciation available to you. Anything that commenced construction after September 16 1987 attracts a building depreciation allowance of 2.5%/annum for 40 years of the building cost – not purchase price.
On top of this there are plant and equipment allowances that are depreciable at varying rates and lifetimes depending upon the various ATO rules.
Hope this helps
Derek
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