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Hi Eamon,
Generally, you can loan money to the trust, and the trust will have to pay you interest. So, in your personal tax return, you will have an interest deduction for themoney borrowed, and interest income from the trust.
If you loan money to the trust and don't charge interest, you can't claim the interest, as there is no nexus between the interest deduction and the income.
The trust also gets a deduction for interest paid to you.
The money woiuld have to be loaned, not gifted, to the trust.
Hi Tania,
Just sent you a PM.
Great first post. We seem to be getting a few of these lately…
mortgagedetective wrote:Dan42 wrote:If you took the rebates as cash, the value would be much, much less.
Gidday Dan42
Some brokers direct deposit to your loan on a monthly basis unless otherwise directed so it is as close to cash as you can get.
It's probably fairer and perhaps more accurate to say if you redraw the cash from the loan account, the interest and finance saving would be less, not the value.
If you then spent that money on 'lifestyle' the value is hard to determine.
However if you took those refunds and invested them into something with solid returns, the value could be more, much more.
But that's my point. Not to go over old ground, but the broker is not depositing $30,000 into my account. It 'becomes' $30 grand due to the power of compund interest. It is a $30,000 saving on interest on the term of the loan, if you choose to leave it in the loan.
If it is taken out of the loan, it is easy to calculate. It's the amount you receive in cash, pure and simple. And it would be a hell of a lot less than $30,000 in today's dollars.
whoper123 wrote:Hi Michael,Just wondering if the saving is 30k in today's term, simply by choosing a different type of agent, how come it is not a well known strategy? I have never known this.
The extra skill /service is definitely not worth 30k to me. To simply prove the point, I can use a moron agent, and pay an accountant 10k to fool prove it. I still save 20k.
It's $30K in todays dollars over the life of a 30 year loan, or $1000 a year. The $30k is achieved by paying the rebated commissions into your loan. The beauty of compound interest does the work for you.
If you took the rebates as cash, the value would be much, much less.
eloi wrote:but unfortunatly the bubble has to pop some time and australia wont be any different to the rest of the world. If it doesnt pop not it will in 1 year but even worse if not in 1 year then 2 years but even worse that 1 year and so on and so on. it has to pop because its unrealistic and based on false numbers.
Firstly, a bubble does not necessarily have to pop. Two, who says what we are currently experiencing is a bubble. Three, there was an article in the Weekend AFR (not online) about the 20% plus increases in rents for apartments in Sydney, Melbourne and Brisbane, shooting down your theory about rents not rising.
FrugalOne wrote:If I was to purchase a property purely for investment purposes, and it was purchased outright for say $100000, would I recieve the tax proportion of the $100000 back as a tax deduction?No. The outright purchase is a capital cost and not deductible against rent or other income.
The purchase price forms the cost base for capital gains tax purposes, when the property is sold.
Here's my prediction – one economist will say we are in for higher interesta rates and inflation.
Another economist will predict we are in for a recession, high unemployment and lower interest rates.
Economists predictions are varied, I wouldn't concern yourself with them too much. I personally love Ronald Reagans advise, that there should be an economist's version of Trivial Pursuit, with 100 questions and 3000 answers.
House Call wrote:We have since bought an IP in the same suburb which will have an income. Would that change things?Buying a different house is – unfortunately – irrelevent for tax purposes.
The costs incurred in purchasing an investment property, such as building inspections and conveyancers costs etc, are capital in nature and not deductible against income. Capital losses can only be offset against capital income. You would be able to carry the loss forward until another IP was sold.
eloi wrote:hey freeenterprise can you please explain why there is new unsold properties in sydney, perth, brisbane, gold coast. if its like you say that we have an undersupply of property by %1 then why do we have these unsold brand new apartments and houses. im baffled by this because if there is an undersupply then we would not have one vacant property. Why have rents only increased by %1 the last year when all the real estate people where saying %3 to %7 increase over the year.Maybe new apartments are over-priced. Just because there are properties on the market does not mean there is an oversupply. People still have to be able to afford the property, they just can't rush in and buy because the property is on the market.
If there was an oversupply, as you suggest, wouldn't rents have decreased?
wafti123 wrote:Thanks guys, I was wondering that if you don't change your mailing address, how can you prove to the ATO that you were absent from your PPOR. It seems that there is nothing stopping someone from saying that they moved out for a short time to claim the CGT exemption while actually living in their PPOR. DanDo you mean if you are renting out rooms?
If your PPOR is producing rental income, then you need to have moved out, so you would need to change your mailing address.
Generally, if you have people boarding with you in your house, the income is not declared, and the expenses are not claimed. Boarding income is not generally considered rental income, so it has no effect on the main residence rules.
If you want to declare theincome and expenses, then yes, you would need to move out and change your address. The onus is on you to prove that you have moved out, by changing your mailing address, your drivers license, electoral roll etc etc.
wafti123 wrote:Hi Kris, that is a great answer, thanks. I am not going to buy another property. I was thinking of boarding with my folks or renting somewhere closer to work so that I can cycle to work while my car is out of order. Finding tenants isn't too hard as my friend has already expressed interest. I am able to collect my mail from my PPOR once a week. Having said that, is it advisable to redirect my mail to wherever I end up renting? Thanks once again. DanHi Dan,
You don't have to have the mail at your PPOR to still claim it as your PPOR for CGT purposes. So I would suggest re-directing the mail, as it would be much easier having the mail sent to wherever you are living.
Having mail to your PPOR is advisible when you are establishing a residence as your main residence. As you have already done this, you can redirect the mail without worrying about it effecting the main residence exemption for CGT.
I hope this makes sense, I have rambled a bit here!
eloi wrote:. Australia has an oversupply of properties and the latest numbers just prove it. here is the link to the articlehttp://www.crikey.com.au/2010/07/12/housing-shortage-myth-keeps-bubble-talk-on-the-agenda/
I've read the article twice and fail to see the 'proof' that Australia has an oversupply. Just because rents haven't risen does not prove an oversupply.
eloi wrote:hey hans what was the name of the four corners program. your link doesnt take me there and i can not find it anywhere else.It's called 'Overdose'.
Ditto about the caps lock.
What sort of lease does the office building have? For how long?
As Terry said, getting finance will be an issue as a casual.
Yes, it was a scary episode. My dad rang his financial planner to discus options for retirement in the days after the episode aired. The FP said, "Did you see Four Corners, too?" He had been inundated with people worried about their super.
Banker, I agree. At some stage in the future, the debt has to be repaid, and stimulus measures can not go on for ever. The US is in a terrible state, the result of the 8 disasterous years of George W Bush, and the terrible start to the Obama presidency.
We are not insulated, but start of in a much better state then the US, UK anbd Western Europe, due to the resources booms of the past decade. But that won't last forever either.
Philip, I'm a little bit sceptical of Robert Kiyosaki. He saysthe middle class could be wiped out due to lack of financial eduication. Well how do people get educated? Buy his books! Seems a litle self-serving to me.
My personal opinion is the government of the day, regardless of their 'colours', takes too much credit when things are going well, and gets too much blame when things are going poorly. So they feel the need, as Philip says, to pump money into the economy during troubled times. But it can't go on forever.
Corie wrote:Also if there is no defined amount of time you have to live in a property for it to become your PPR how does it qualify as your PPR.
There are a couple of tests to determine if it is your PPOR. Have you connected the electricity, gas, phone in your own name? Have you changed your address on the electoral roll, and your drivers license. Have you had your mail redirected to the new PPOR.
These type of things show your intention for the new house to be your main residence. There is no set time limit in the legislation, but I think the courts have used a period of three months as a type of guideline.
ninjatunes wrote:Ok thanks for that, how also would i get started, once i add up all the out of pocket negative gearing tax so that i can receive the deductions now instead of at the end of the year?You can apply for a PAYG withholding variation form, so that your employer deducts less tax from your salary.
I'd say something has been lost in translation.
If it is being rented out in the future, the maximum CGT that can be avoided is 6 years, as long as your friend does not have another PPOR at the same time. As Terry says, your friend can move back in before the end of the six year period, and this re-triggers the 6 year rule.
The '6 months' would be about the FHOG, not CGT. There is no defined amount of time that you have to live in a property for it to become your PPOR.
Hi,
1) – Landlord Insurance isn't much, $400-$500 a year, plus we get a discount on our insurance because it is managed by an agent. For a first timer, I'd put it through an agent, because the agent will also know the laws in relation to the tenancy.
2) Depends on your tax rate. The rental loss reduces your taxable income. Say you earn $50,000 a year. Your rental loss is $4,000. Your taxable income will be ($50,000 – $4,000) = $46,000. You will pay tax on the $46000, so you save ($4000 * 30%) = $1200 tax.
3) Don't bother with a financial planner. Go and see an accountant who has business clients, because they can help re: business structures, business plan, tax matters etc.
