Forum Replies Created
It would be deductible as maintenance.
npg wrote:Do you have a life partner? you can form a company (as my wife and I have) and the profit of 20,000 (40,000 – 50% break) can be divided amongst individuals who form the company and the company itself and therefore each portion of the profit is subject to a lower tax bracket. Probably dosen't make sense so make sure you speak to an accountant who specialises in the subject. don't forget if you re-invest the profit into your next investment it wont be taxable untill your next profit and so on and so on………but speak to an expert!I think you mean a trust.
Just to clarify, profit of a company is taxed at 30%, and there is no Capital Gains Tax Discount. A trust's profit is taxed in the hands of the beneficiaries, and if the beneficiaries are individuals, the 50% discount can be used.
Hi Walks and Nic,
I'm a Chartered Accountant based in Norwood, and our firm has many clients involved in the property industry, from single rental properties to large CBD developments. If you would like some more details, send me a PM.
Rgds,
Daniel
Transfering from your name to a family trust may trigger stamp duty.
Talk to your accountant about setting up a family trust, and the costs will be somewhere from $250 to $500, depending on their margins!
Hi W4L,
I'd make two comments. One, if the Rudd govt didn't spend as they did, Australia would have gone into recession, and unemployment would have been much higher. The test will come when it is time to STOP spending. Hopefully they can see the signs and rein in the spending, or we will have higher inflation, interest rates etc.
Secondly, in the second half of the Howard govt, they spent like the proverbial drunken sailor. If they had saved MORE at that time, rather than blowing money on middle class welfare, we would be in an even better position.
I heard last week that there are currently 8.5 taxpayers for every person on an aged pension. By 2030, the ratio will be 3.5:1.
That will be the real battle; funding all the boomers who are retiring with minimal super.
quickchick wrote:I recommend reading Steve's revised copy of 0-130 pproperties in 130 years, as it will be a great help.
quickchick
Wow, I didn't realise it took Steve THAT long to buy his properties!!
quickchick wrote:From my understanding (which is not complete!), the only way NOT to cross-collateralise, as you say, is to withdraw equity and make your first IP loan independent.
This could mean that eg you leave 20% equity in PPOR loan and take 20% deposit for IP out of home loan.
Hang on a minute, that is not a great position.
Costs from your PPOR are non tax-deductable, but IP costs are.
So if your 1st IP is cashflow positive, then you theoretically make more profit from it and will pay more tax, by having some of your PPOR home equity propping it up.
Having less equity in your home is NOT helping you get ahead most efficiently.Hi quickchick,
Just wanted to clarify something. If you withdraw an amount of equity from your home, for the purpose of purchasing an investment property, the interest on the LOC would be tax deductible.
Interest is determined by the purpose of the borrowings, not the security offered against the borrowings.
One way to do this is have a separate loan for the IP deposit, rather than just redrawing on the current PPOR loan.
Hi Trent,
You would have to pay Capital Gains tax when you sell, for the percentage of time the unit was used as an investment. There would be no CGT payable if it was solely your residence.
One way to avoid CGT would be to move into your unit, move out 6 months later and rent it out for up to 6 years, then move back in. No CGT would be payable in this scenario.
Hi Cana,
You said your husband pays zero tax on his salary after completing the PAYG variation form. Is this correct?
If he is paying no tax, depending on his income, he may still pay nothing even with the $5 per week increase in rent. If the extra rent forced him into paying tax, it would only be at 15% marginal rate anyway. at most, it would cost him (15% x $260) = $39.
Also, on the contract of sale, you must notify the purchaser that you have chosen to apply the margin schem, otherwise you could be up for the full 1/11th of the sale price.
Hi Joel,
You are right in that normally residential property does not attract GST, but if you sell new residential property, and you doing this as a business, you are required to pay GST. Basically, if you are in the business of building residential property, and your turnover is more than $75,000, you are required to register for GST.
The GST can be calculated using a system called the margin scheme, which reduces the amount of GST that you pay on sale.
eg
Bought land for $300,000 (assuming purchased after 1 July 2000)
Development Expenditure $250,000 (you can claim GST credits on these purchases if you are registered for GST)
Sold for: $650,000Your GST under the margin scheme would be: (sales price less cost price) / 11
= $(650,000 – 300,000) / 11
= $31,818The deed usually names Primary Beneficiary/s, then has following beneficiaries, such as,,
the spouse of the primary beneficiary,
any children of the primary beneficiary, etc.
Yes, you can have whoever you like as a beneficiary. It's best when setting up the trust to include all and any posible beneficiaries, such as children, grandchildren etc, as well as companies of which you are a director etc.
It is at the trustee's discretion as to who receives a distribution from the trust for any particular year.
I think you would have an issue with the In-House Asset rules.
Hi Kacha,
In regards to the income distribution of the trust, your accountant is correct. The majority of the income should be distributed to your hubby as he is the sole income earner of the trust. These rules are the Personal Servises Income rules, and look to limit the profit splitting from trusts.
It looks like what your accountant has done is outline a number of scenarios for you, showing the positives and negatives of each situation, rather than make a recommendation for you.
I personally wouldn't put it in the same trust that operates the business, from an asset protection point of view.
On whether it should be in your name, hubby's name or both, I guess it comes down to whether you think the tax savings of having a negatively geared property in your husbands name outweigh the possibilities of your husband being sued. Is that a risk you are willing to take? Some people would, but some wouldn't.
Another option is to put the IP in a new trust, although this will not give you the tax benefits it would if it was in your own name/s.
It really depends on whether the more important thing to you and you hubby is asset protection or tax advantages.I hope this helps.
WJ Hooker wrote:Lets have a monthly update.Dan42 – Steve Keen predicted 20% drop not 40%. But even he was surprised by the large drop in interest rates, to save the house drops. But, lets see how we go from here, I know lots predict massive price rises over next few years ( if it happens then I will be happy and make lots of money ). I posted this not wanting it to come true, but this is what I think will happen.
Both of these stories talk about Steve keen forecasting a 40% drop. In the second link he says he is standing by his forecasts.
I wish I had a crystal ball too! My problem with your prediction is that Steve Keen and his disciples were talking about this huge drop in the Australian property market – Keen said 40% – over 12 months ago. It's a bit like the boy who cried wolf.
What has happened in the US hasn't had a dramatic effect on the Aust property market over the last year, so why would it start now? If it was to have an effect, we would already be feeling it. Instead, over the last 12 months the median price of property in capital cities has risen, except Perth.
Interest rates are a concern, but they dropped 3.5% in less than a year. if they rise 1.5 to 2% in the next 12 months, they are still historically low, and less then they were 14 months ago. And banks aren't lending money like they were before the GFC, there are more hoops to jump through. There are no 100% loans left, and soon there will be no 95% loans either.
I can't see a 20% drop, and I hope you're wrong. Just like all the other doom and gloomers who were here 6 months ago.
Are you telling me a couple of teachers, earning $55,000 a year each can't afford a house? They might not be able to buy where they want to buy, but they could buy in plenty of suburbs in capital cities.
If the Real Estate Market doesn't crash within 12 months, at best it will just stand still, but forget your 10% yearly increase in property.
I don't think many people are predicting 10% increases at the moment, but in your post you were predicting a FALL. Are you backing away from that now?
I also don't buy that the FHOG has boosted prices by the 20% figure that you plucked out of thin air. First home buyers make up less than 10% of the market, and yes, they probably did help the lower end of the market. But I'd like to know how you came up with 20%.
Other reasons we haven't suffered the price crash of the US is we have such a small minority of 'subprime' loans, our overall economy is in better shape, and our unemployment rate is about half of the US.
Search some of the archives on this site and you will see that there were many similar posts about 6 to 9 months ago, saying exactly what you are saying now.
jmielle wrote:The Economy is doomed! http://www.youtube.com/watch?v=HPeu88ibdl8Most of what is said in this Youtube rant is garbage, and nothing is backed up with any hard evidence. It sounds similar to the doom and gloomers that were on this site about 6 to 9 months ago. Most of whom, incidentally, are no longer here.
If it was outstanding, perhaps the purchaser thought you had already paid it, which is why it didn't appear on the settlement statement. Perhaps, I'm not sure.
I think you should do the right thing and pay it.
