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Hi Steve,
Generally, with a 95% loan, you will need 5% of the purchase price, plus costs. I'll leave teh other questions to the finance gurus.
The fees incurred in the payout of old loans will be tax deductible.
The fees for new loans will be deductible over a full five year period, rather than all deductible in the one year.
The morgage broker gurus will be able to explain this better, but the equity you have in your PPOR would not be enough to use as a deposit. Most banks will now only lend to 90%, some lend to 95%, so that only leaves a maximum of 4% from your PPOR to use as a deposit, including stamp duty and mortgage insurance.
This is assuming you have no other savings?
crj wrote:The simplest way (for them) to minimise CGT is for them to be living in the 1988 house as their PPOR when they die, then the children have 2 years to sell it without incurring any CGT.
Your solution needs expert advice
How does that help if they want to subdivide and sell townhouses for profit?
An accountant or solicitor can set up a trust for you, costs range from $350 to $1000 depending on how much advice is required and how complicated the setup is. Ongoing costs for a trust with individual trustees can be $200 – $500, dependent on how much work is involved.
If your current borrowing is 91%, where are you going to get the deposit from? If the bank won't lend to you and your wife in your own names, then they won't lend to a trust that you control. A trust borrowing, with no other income,. would require a personal guarantee from you and your wife.
You could pay to get a depreciation report, but as it was built in 1984, depreciatiopn on the building would almost be finished. If any major appliances were replaced (air conditioner, oven, dishwasher etc) you could look at claiming depreciation for these, depending on when they were replaced.
The ATO release guidlines as to what can and can't be claimed, or try and meet with a new accountant.
I'll answer the last one first – no. There would be some CGT on the rental, even if they moved in.
If the contract for the pre-85 house was for $700,000, then that should be ok as it will be free of CGT.
The issue i see is that they will still have the title for the rental, and will have to pay some CGT or income tax (depending on intent) on the sale of the townhouses. There will have to be a transfer either to you or end purchaseer at some stage, and this will trigger a tax event.
One other thing to consider is a clause in the contract to allow you to inspect the property prior to settlement, and void the contract if it has been damaged etc. A lot can happen in 6 months.
I would say this presents you, as a first time buyer, with a nice opportunity. Firstly, prices may rise in the 6 months from contract date to settlement date, so you have some capital gains made before you have settled.
Interest rate movements would be an issue whether you have settled or not. What you could do, is put some money away in the 6 months before you settle as if you were paying the mortgage. In effect the 6 months could provide you an opportunity to save some more money before settlement.
Long settlements will put off a section of the buyers, so as a first time buyer with flexibility on settlement (I assume) you should have less competition for this house, and hopefully that may reduce the price in your favour.
realestateedu.com.au wrote:Don't forget their money is our tax money.Labor spends and Liberals save, hence the name be liberal.
Every promise Gillard makes will send us further into debt, when they took over we were in surplus now we are in debt.
That's rubbish. The two parties are pretty much similar in their spending promises. Both have promised to get the budget back to surplus. To say one saves and the other spends is not right. Do you remember the spend-a-thons at the Liberal party launches in 2004 and 2007?
Just to clarify, Duckster is correct. CGT is calculated from contract date.
Terry's right, shop around for a new accountant. From your infoprmation provided, you should be able ot use the six year rule for CGT exemption.
Incidentally, you would be amazed as to how many accountants don't know this rule. We had a discussion in a previous workplace, and three quarters of qualified accountants didn't know the rule.
Thats right. You can only claim one PPOR as your main residence at any one time.
sassy75 wrote:thanks. Yes i meet the criteria. I lived in it for 6 months whilst I renovated it when I first bought it in Nov 2005. It is in Melbourne.Hi Sassy,
Just thought I'd check re: 6 year rule, as a lot of people get this wrong. But it looks as though you can sell CGT free. What you may wish to look at is if selling and buying something else in your husband's name. THe issue here is that buying and selling is expensive, with agents fees on the sale and stamp duty on the new purchase.
The other option is to transfer the current property into your husbands name, but this I believe will incur stamp duty. (I'm not 100% sure as stamp duty laws differ in each state. Best to check.).
The question that you will need to ask is whether the stamp duty payable will be less than the expected tax savings.
There is a fair bit of this type af analysis around at the moment. But a couple of things I take issue with. Firstly, I couldn't care less what the multiple of gross income to house price is, or what some pointy head from the US has to say about how expensive our prices are compared to theirs. It is irrelevant.
Secondly, none of the economists or finance guys talk about the non-financial reasons why people want to buy a house, instead of renting. Based on a purely financial analysis, it may make sense to wait a few months to buy a house, but what if your dream house comes on the market, and you can afford it? What about if you are buying a home you wexpect to stay in for a long time?
Transferring an investment property will most liklely trigger stamp duty, depending on which state the oroperty is in.
For the 6 year rule, you have to have lived in the property before renting it out, and not be claiming another main residence. Do you meet those criteria?
I've read 'Rich Dad Poor Dad' and took a bit out of it. I liked his earlier work, but his latest stuff, in my opinion, borders on hysteria and scare mongering. As a general rule, anything with 'conspiracy' in the title should be avoided.
number 8 wrote:Hi Matt,My best guess is that they won't lift it above the reserve (all things being equal), they have clearly enough margin from the last above reserve rate rises (to think we were all feeling sorry for them facing higher costs). I dropped off my lunch on several occasions to the executive as I thought they were having trouble making ends meet…….. I will be asking for that vegemite sandwich back.
I would bet you anything that rates will rise after the election, independent from the RBA (and when I say anything, I mean up to 2 dollars. I'm not a big gambler.)
eloi wrote:LOOOOL i can tell u work for a major bank. We all know that the only reason most of those non bank lenders stuffed up was because of the GFC. If ur talking about exit fees then just look at the major 4, if u want to see higher rates just look at the major 4. All u have to do is have a look at resi, Mortgage house and a few more to see how much better their deal are than the major 4. The problem is that the GFC caught everyone of guard and that includes the major 4. The major 4 where just lucky that they had australians hard earnedmoney in their accounts that they could use to bail themselves out of trouble or else they would be going down the same road and the non banks.Eloi, do a search on this site for exit fees from RAMS or RHG, and see how many members of the forum were stuck with non-banks because of the ridiculous exit fees.
Saying the big 4 were bailed out by savings accounts is ridiculous. They had to borrow from many different sources to fund loans.
This is not a defence of the Big 4; they had a nice government guarantee to help them through the GFC, and their overall treatment of small business was disgraceful, but I'd rather have a strong banking sector than a system like the US system.
Karl, If it's depreciation relating to the investment property, then it is an expense to be recorded against the income of the rental property. It sounds like your accountant has put it in the right area.
I assume your accountant has a three year university degree, then if he / she is a CA or CPA, they have done further training, as well as ongoing education to maintain their qualification.
Just because your accountant may not have an IP, he / she will know how to do the TAX RETURN for an IP.
You don't have tohave been to the moon to know it's there, Karlos.
