Generally, a company set up to act solely as trustee is the best option, because, if it is sued, it has minimal assets. Your trading conmpany, if that was sued, would bring your business into jeopardy. You can change the trustee down the track, but it would be easier to get things set up correctly right from the start.

Matt,Any loss would be offset agains the gross capital gain (ie: before discounting), so the capital gain in your example would be (200-20) / 2 = 90.Secondly, a revenue loss CAN be offset against a capital gain, so it doesn't matter what type of loss you have in the trust.There is no gain if you change trustees, because the trust is the…[Read more]

My understanding is that if you are living together, one partner can not charge the other rent, because you would be living together in a de facto relationship. However I can't find anything that backs this up on the 'needle in a haystack' ATO website.

nitrodrops wrote:
Btw, is the rental income taxed @ 50%, something similar to CGT? CheersNit

Rental income is taxed at your marginal tax rate, the same as salary income etc. Capital Gains are also assessed at your marginal rate, but if you have had the investment for over 12 months, you only pay tax on 50% ofthe Capital Gain.

I was just reading about this issue this afternoon. You CAN capitalise interest, as long as it isn't part of some other scheme to avoid tax.

bundyanimal wrote:
I would be looking at something like this in a couple of months. I was going to rent out the investment property to myself after it has become vacant, to do some maintenance works to it. I was going to rent it out from my Company (who owns it). As I am a director, is this not allowed.

Is the rental property owned by a company…[Read more]

The problem occurs because your current IP loan is $160,000, and after re-financing it will be $220,000, plus $55,000 on an LOC. You have borrowed an extra $115,000. The deductibility of interest on this amount is based on the primary use of the funds. If these funds are used to pay down your PPOR, the interest on this portion would not be…[Read more]

The 20% deposit from the LOC would be for NEW IP's, not re-financing a current IP. The interest deductibility rule is basically, what did you do with the funds, so increasing the debt on your IP's to pay down the debt on your PPOR would not make the extra debt on the IP's deductible.

No, you can't claim the property as your PPOR, and, once sold, the CGT will be calculated at the marginal rates of the beneficiaries of the trust. The trust will be able to claim interest, council rates etc, provided the tenants (you) pay a market rent.

The issue is you are gaining an advantage – why else would you do it? The govt and ATO are cracking down on loans between companies and shareholders / directors. I would get some solid advice about this from an accountant who specialises in FBT, or a tax lawyer, before proceeding. Did you ask the mortgage broker if he / she is a registered tax…[Read more]

You get the main residence exemption for your PPOR. Your intention at the time of buying basically has no impact. If you were living in it and you had no other main residence, then any gain should be exempt from CGT.

The full amount would be depreciated, and the insurance money received would be recorded as income. Also, you can write off any undepreciated balance of the old air conditioner.

Hi Lil,The $600 establishment fee is deductible but over 5 full years, not all in one year.

1. Yes, you have to pro rata the first 6 months, and pay CGT on this portion. You bought the unit knowing that it had a tenant, so you have to pay the CGT.2. Yes, you have to declare the rental income, but you get to claim the interest, council rates, water rates, etc for the first 6 months also. Depending on your level of borrowing, and the…[Read more]

Terry's right, you have to live in it first. It's an absence from your main residence, and doesn't apply if you are claiming the main residence exemption for another property.In your example she would pay CGT on the gain for 6.5 years.

god_of_money wrote:
Cattleya,where did you invent such the formula? You would get exemption up to 6 years, unless you have more than one PPOR

The basic formula shows the time it was used as a rental property, generating income, as a percentage of the total ownership period.In practice the 6 year exemption is not a common occurrence, as most…[Read more]

Hi Elizabeth,The investment losses are income losses, not unrealised capital losses. eg, say you have a margin loan to buy shares, and your income from the shares is $3,000, and your interest bill is $5,000. You have a tax-deductible loss of $2,000. However from (I think) July 1, this $2,000 loss will be added back for Centrelink purposes. This…[Read more]

Hi Nepash,I've just sent you a PM.

Super funds pay 15% tax. If the property has been held for over 12 months, there is a 1/3 discount, reducing the tax rate to 10% on the capital gain of the property.

jazz77 wrote:
Dont you just get back 30% (company tax rate) of the 50%  ?So it really just knocks off 15% of the purchase price, not bad, but not as good as some people think.

Plus the yearly depreciation. So over the life of the asset, you would get the tax deductions as described earlier, assuming no private use reduction.