Hi there was wondering if someone could help me out as i am new to property investing, i bought a block of land a year ago for $200 000 and I am thinking about building on it and renting it out .. so my question is .. if i build on it I am going to need to borrow an extra $150 000 .. so that will take my loan to $350 000 , i am guessing going on what other rentals are getting in the same suburb that with a brand new 4×2 on my block i could fetch anywhere between $360-420 a week in rent, so lets say I rent it out for $400 and my rental income off the property is $1600 a month, but the interest on my loan for a month is say $2500 … so that would mean i would have to pay $900 a month outta my own pocket .. so does that mean that the $900 i am paying towards the interest I can claim on negative gearing?? Can i claim the whole lot back or only a small portion? Sorry if this sounds a stupid question but this will be my first IP so any help would be greatly appreciated
thanks!
Hi Paul
$400 per week = $1,733 per month, If you use a property manager, lets say, less 8% = $1,594. Less costs for insurance, council rates, water rates and maintenance = $???. But because your question is about negative gearing, lets keep your figures as you mentioned.
Let's say your accountant works out that you have an annual loss on the IP of $10,800, i.e. $900 per month. This $10,800 loss reduces your annual taxable income by $10,800. Now depending what marginal tax rate you pay, your tax bill will be reduced by what you would normally pay on $10,800. If, for example, your marginal tax rate is 40%, you would save $4,320 in tax payments, i.e. 40% of $10,800.
There is also a way of getting this tax saving each month but ask your accountant about this. Good luck.
Cheers, Paul
Paul Dobson | Vendor Finance Institute
http://www.vendorfinanceinstitute.com.au
Email Me | Phone MeAn alternative way to finance your home.
Hello Paul
As it will be a brand new house you will also have great depreciation deductions to claim which will also help save tax on your other income.
Speak to your accountant about this too and maybe get him to help you calculate your actual holding costs.Cheers
ElkaOk thanks that makes sense, while im on the topic can any1 recommend to me any accountants in perth??
cheers!
To make it simple this is basically what you do.
You add up all expenses related to the property.
Then you add to this non-cash expenses (These are things you can claim without actually paying for them there and then – eg. travel, borrowing costs, depreciaton of fittings, deprecriation of building etc).This gives you your total expenses.
Profit is income minus expenses. So your rental income – the above two lots of expenses.
If the figure is negative you can minus this from your yearly income and you will get a tax refund at the end of the year, or weekly if you fill in the variation forms with the ATO.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hey Paul Just wanted to know if $150k was for the house complete? That figure sounds alot less than the norm unless your owner building which I have just finished and came in higher than that. If it is higher it of course changes the figures especially your outlay each month.
CheersGday Nejas, Nah thats not complete .. that price is what I got off the builder to build the house and site costs .. the rest of the stuff like floor coverings, blinds, aircon , landscaping etc, i was gonna do all that myself because i have some cash saved up for that and was just going to borrow 150 which would covering building the house basically..
cheers
paulGood on ya buddy thats the only way to save when building! All the best!
Terryw wrote:To make it simple this is basically what you do.You add up all expenses related to the property.
Then you add to this non-cash expenses (These are things you can claim without actually paying for them there and then – eg. travel, borrowing costs, depreciaton of fittings, deprecriation of building etc).This gives you your total expenses.
Profit is income minus expenses. So your rental income – the above two lots of expenses.
If the figure is negative you can minus this from your yearly income and you will get a tax refund at the end of the year, or weekly if you fill in the variation forms with the ATO.
Sorry about going off topic but is it possible to fill in the variations form with the ATO by claiming the cost of other work related expenses?
not_so_lucky wrote:Terryw wrote:To make it simple this is basically what you do.You add up all expenses related to the property.
Then you add to this non-cash expenses (These are things you can claim without actually paying for them there and then – eg. travel, borrowing costs, depreciaton of fittings, deprecriation of building etc).This gives you your total expenses.
Profit is income minus expenses. So your rental income – the above two lots of expenses.
If the figure is negative you can minus this from your yearly income and you will get a tax refund at the end of the year, or weekly if you fill in the variation forms with the ATO.
Sorry about going off topic but is it possible to fill in the variations form with the ATO by claiming the cost of other work related expenses?
Hi
I am not sure, but beleive you can. The variation form could probably be used by anyone who is paying more tax than they should be. It would be better to get the money in your account asap so you can earn interest on it.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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