Forum Replies Created
It depends on a number of questions:
Firstly, you have mentioned your intention was toi live in the property. You therefore weren't developing with the goal of making a profit. Also, it is a one-off development, not an ongoing business.
I think you would be fine to argue that you are not in the business of developing property, so no GST should be payable on sale.
Yes, it would be deductible. But as a borrowing cost, it would be deductible over five years. It would not be 100% deductible in the year of re-finance.
Yes you can cliam expenses as long as the property is available for rent.
As for improvements, they may be classified as initial repairs, and would have to be depreciatede, rather than deducted outright. You might get away with painting, but replacing the gutters and restumpoing the house would most likely be classified as intial repairs and form part of the cost base of the house.
In short, yes. If you can make an argument as to why the interest is higher than normal (unsecured, short term etc) then you may be ok. 150,000% is probably a bit excessive, though.
Generally, if you are travelling to view a property you are planning on buying, you can't claim the car deductions. The reason for this is that the expense has been incurred 'too soon', because there is no income to offset the expense against.
You can claim car expenses for visiting properties you own, because the expense is seen to be incurred in gaining income. There is an income producing asset, and you are claiming deductions against that income.
There are a number of ways to claim car expenses. The most common way would be the 'cents per km' method, where you are allowed a certain amount per km. This includes all expenses related to the cost of your car.
Hi Woodie,
I think the Westpac offset account is a everyday transaction account, but I'm not totally sure. The finance gurus will have some more information.
Woodie wrote:What do you see as a deficiency in the CBA offset account?
It's not a full transaction account, deposits and withdrawals havea $500 minimum, and an initial deposit of $1000 is required. Its called a Mortgage Saver, and to withdraw money from this, you need to transfer it to a Streamline account, then to whoever you want to transfer it to.
Apart from that, it's great!
It depends what state you are in. I'm pretty sure you can't do that in South Australia.
Let's say you offer $182,000. What's to stop the agent from going to prospective buyer number one and asking them for a higher offer? Then the agent is running some sort of quasi-auction.
The test for deductibilty of interest is what were the funds used for. If you pay out the 20% LOC on the sale of your PPOR, then that loan is paid out. Any new loan will have to satisfy the same test.
If you borrow the same 20% again, what would the funds be used for? They wouldn't be used to buy the IP, as the IP has already been purchased.
As Mr501 mentioned, you could get a new LOC presumably secured against the IP, to pay out the current LOC, but this would be dependent on the equity you have in the IP. More than likely, you would be required to pay mortgage insurance as it would take you over 80%.
That's the only way around it.
Hi Emma,
Firstly, yes, you are correct. The sale will be CGT free up until March 2013 OR you buy a new PPOR.
On the subject of advice, your accountant would be able to talk you through the positives and negatives of selling the property, and keeping it as well, One thing I will say is that buying and selling property, even if there is no CGT, is expensive. You would pay agents fees on selling, and stamp duty, mortgage costs and transfer fees when buying a new property.
I'd speak to your bank about what would happen IF you sold, and how much they would take to pay down the second loan. I wouldn't talk to them about whether to sell or not, as they probably wouldn't be licensed to give advice anyway.
In your situation, it really depends on what you want to do with the money if you sell. I personally wouldn't sell, then buy another two properties, due to the costs of buying and selling. If you have no set plan on what to do with the money when you sell, then I would wait for a couple of years, or until you decide what you want to do with the money.
It sounds like a great property, and personally, I would be reluctant to sell it.
Good luck with your decision.
Dan
Thanks Terry,
That was my concern as well, that the majority of my income would be coming from a discretionary source. But as director of the trustee compamny and appointor of the trust, I should be able to get some money into my own name!
To answer question 3, yes, your deduction for interest is limited to the interest on the $170k to buy the first property. Interest deductibilty is determined on the purpose of the loan, not the security offerred.
If its only six years old, then it's definitely worth it. The building allowance alone would more than pay for the cost of getting the report.
If you haven't claimed any GST on the purcahse, and you have to pay GST onthe sale, then you are eligible to use the margin scheme. Depending on whether you bought the property pre or post July 2000, there are different ways to work out your 'cost' for margin scheme purposes.
If it was post July 2000, then the cost for margin scheme is what you paid for the property.
The above case relates to claiming a GST credit on the purchase,and is not a margin scheme issue. It's an input tax or taxable supply issue.
You need to advise the purchaser in writing that you are electing to use the margin scheme. This is usually done with a clause in the contract.
If you haven't paid and claimed a GST credit on the purchase, then you can use the 'margin scheme' to reduce your GST liability on the sale.
If you bought the land after July 2000, using the margin sheme would mean that you would pay GST on the difference between the sales price and the original cost price.
From your example above, The GST would be payable on $450 – $200.
KRB,
If you spent more time here, rather than just supporting your WAG mates, you would know that Richard has many properties.
The fact is, if a business is developing property and then trying to sell that property to their 'investor education' clients, then they have a conflict of interest. Do you go for the highest price possible, and charge your 'students' too much? The free information sessions are basically used to drum up business for the properties they have to sell. They tell you why investing in property is so great, the tax breaks etc, then, "Oh, by the way, we have a property for sale that is perfect for you!" Yawn…
If you need this type of education (and really, they teach pretty basic stuff) then you are better off getting it from someone who does not have a property to sell. At least you'll know where their interest lies.
kum yin lau wrote:Hi losty, your case made me really look at the numbers.
It's so simple it's almost idiotproof.
$9000 p.a. = $750 p.m. x 2 = $1500 p.m.
Accrued interest tax saved
$1500 $6.25 $31.25$3006.25 $12.53 $31.25
At the end of 15 years, the total accumulated is $744430.50
That doesn't include the tax savings.
Essentially, by each partner paying $130 – $150 per week into an smsf & not doing anything more except ensure it's in a high interest [daily rest internet acct will do it], by the time you're 50, you'll both have close to a million in cash.
Is that so difficult if you're earning $100K each?
KY
I can't see where you have taken out the 15% tax on the contributions. If the contributions are tax deductible to you (or your employer) then the superfund has to pay 15% tax on those amounts.
I also don't think you have deducted the ongoing costs of maintaining the fund.
As Terry has said, the short answer is Yes.
The long answer is YYYEEEEEESSSSSSSSSS
Hi kmuki,
Firstly, the question of increased borrowing power of a trust has been discussed on this forum by many of the mortgage brokers here. The consensus seems to be that a trust can not borrow any more than an individual can, due to the personal guarantees required, and the disclosure of these guarantees.
A Family Trust, especially with a corporate trustee, will provide increased asset protection, when compared to operating under your own name. It is a good idea to keep your investment assets separate from your personal assets.
Your loan on the IP will most likely require a personal guarantee, and with any amount owing to the ATO, the directors of the trustee company are liable, but in most other instances, the trust / company provide protection for your assets.
Yes, the website is definitely legit. We sometimes get legal documents from them for our clients.
