Forum Replies Created
Did you buy another PPOR when you moved out, or did you rent? If you subsequently bought a PPOR, when did you buy?
maust wrote:Hi All,
I run a small business and recently discontinued an expensive commercial lease to run the small business from home but not sure what my leasing options and implications are. I have dedicated a room to running the business and do not use this room for any residential purposes. Can anyone assist with the following quesions and any other information that may be important?
1. Can I charge the company rent for the office space utilised?
2. I am currently leasing a storage centre to house equipment. Can I charge the company rent for storage of this equipment within the garage?
3. As an individual, do I need to charge the company GST on the rent? If so, how is this setup and paid to the ATO?
4. Is there any way to avoid paying CGT on the property when it is sold? If not, how is the CGT calculated?
5. The room I am currently using is a little small, although I am making do with what I have got currently. Ideally I would like to build an extension off the house to house the business. Can the business pick up the expense to house the business and if so, what are the tax implications of doing so?Thank you in advance. Any comments or advice is greatly appreciated.
1. Yes, you can, it will be an expense in the company's accounts, but you (and your wife, if jointly owned) will need to declare the income in your personal tax returns.
2.Yes, thje same principles apply as question 1.
3. No, as I'm assuming the rent will be less than $75,000 a year. Under $75k, you, as the lessor, would not need to register for GST.
4.If you charge rent, you would be up for CGT, asuming you bought the property after 21 September 1985. The capital gain would be the selling price less the market value at time of first rent received, by percentage of floor area rented out..
eg. Sold for $500,000, market value of $400,000, Floor area = 10%.
Capital gain would be $10,000, taxed at your marginal rate of tax.
When we bought our house, we signed the contract subject to building / pest insepctions, and subject to finance. We got the inspections done straight after signing the contract, so if we did find anything nasty we could either re-negotiate, or if the vendor didn't want to play ball, we could have pulled out during the cooling of period.
not_so_lucky wrote:If I use the holiday house as equity and borrow the money for the house I'm about to start building, will I then be eligible for the interest deductions? If I rent the place obviously? The Trust stuff just seems to complex
No, as the test for deductibility of interest is, 'what are the funds used for?'. As, in this case, the funds are used to builda new PPOR, the interest would not be deductible.
Now I'm with you. I took the outgoings as income, as it was right next to the rent. (Outgoings paid to you, not by you) I also calculated the Cash on Cash incorrectly. It must be the end of a busy day!
I don't think you've calculated the amounts correctly.
I get:
Cashflow (P+I): $335 p.m. Interest Only: $373 p.m.Cash on Cash 4.5% 5%
How did you get $832 for Interest only cashflow?
Linar wrote:Hi WJ
I think that you are correct. If it was an IP and you transfer into your joint names then you would have to pay CGT on the market value of the place at the time of the transfer. And it would have to become the PPOR for you and your spouse.
I don't know that there is any real benefit though. If you owned an IP in your own name and then made it your PPOR there is no CGT payable. Someone more financially astute may correct me here but if it was an IP in your own name then you would be better off keeping it in your own name and making it your PPOR because at least you wouldn't have to pay CGT.
Cheers
K
The requirement to pay CGT depends on the circumstances. If you bought an IP, rented it out from day one, then 5 years later converted it to your PPOR, then sold it 10 years after that, you would be up for CGT on the time it was an IP.
If the house was bought as a PPOR, then rented out for 5 years, then back to a PPOR and sold, you wouldn't pay any CGT, provided you did not have another PPOR during the time the property was rented out.
In answer to your first question, the interest portion will be tax deductible while it is being rented out, along with council rates, water rates etc.
WJ Hooker wrote:Linar,
Thus, once you have finished claiming your IP deductions over time and payed off your loan ( all in your name ) since you are the one with all the income and wife without. You can then transfer half to your wifes name without paying CGT.
Then get another loan for an IP in your name ,again , and do the same so to speak ???You would have to pay CGT on any transfer of ownership, or part ownership on an IP, assuming that you don't qualify for the six year rule.
SHales wrote:I'd like to think that they wouldn't be spending billions in cash hand outs. What a crock. What about all the massive infrastructure improvements this country needs to go forward, and remain globally competitive. Our road networks and health systems are a mess, I'm guessing that more light rail would be needed in the cities, we need more dams, better port facilities, improved heavy rail, it goes on and on. Such projects could give work to those who have lost their jobs, provide training opportunities for the young and actually give us something valuable at the end. If the government wants to stimulate the country's economy, perhaps they should spend their money wisely on something we need, rather than handing out cash like a geriatric uncle and a family christmas party.I agree, we need infrastructure improvements, but perhaps they should have been started when we had massive surpluses. Instead, a lot of it was wasted on middle class welfare, like the ridiculous Mature Age Workers Offset.
NOS1 wrote:Thanks for the feedback, just another query. If the place is valued at 300k can I sell half to my wife for 150k , and she claim the 150k as a deduction. As well as i claiming the 70k that I already owe.We are currently renting ,but have a property with the tenants in it. This will be our PPOR in approx 10 months when the tenants lease expires.So if we do go ahead I will do this whilst we are renting to avoid CGT.
Is this a sensible strategy.Firstly, your wife can not claim the purchase of the house, or half of the house, as a deduction. Do you mean a loan for $150k?
Secondly, generally you would not pay any CGT when the property becomes your PPOR, but as Eddie said above, you can only have one PPOR at a time. I'm unsure exactly of your situation, as earlier you said you had a current PPOR, and here it says you are renting.
MortgagePlus wrote:Either way, I am not wasting any more time on you (Badger) as this post has just become rational feedback countered by personal attacks.
Tim, your first line was:
Badger, you are obviously a pleb, and have likley not held a job any higher than low/low-middle management.How is that 'rational feedback'?
Unfortunately you are going to have to pay, one way or another. What you have to work out is if the tax savings into the future outweigh the payment of capital gains tax and stamp duty now. You can't have your cake and eat it too.
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No problem at all. Yes, I'm an accountant based in Adelaide, and we have clients all over Australia. When you're ready to set up a trust, send me a PM, and we'll go from there.
Dan
Sorry, I should have said agreement, rather than arrangement.
The company would not need to gift back it's income, as you control it anyway, so the company is not going to sue the trustee to get its money. The gift back from other beneficiaries would be to you, or you partner, or whoever you choose, not the trust.
You've got it. The company is used to cap income tax at 30%. To get money out of the company, it can pay a Fully Franked dividend (after it has paid some tax) to the shareholders.
Hi Lance,
Yes, the beneficiaries and trustees are two separate things.
If you distribute to a large number of cousins, nephews, nieces etc, the trust then owes this money to the beneficiaries. You could then enter into an arrangement for the beneficiary to gift back their distribution, but it can be a dangerous path to take. It depends on how well you know your relatives! The gift back to the trust would not incur tax.
In the case of a large profit made by a trust, I would distribute to myself and my wife, my kids, and my sister and her kids. I would then put the rest into a company, making sure the group pays no more than 30% tax.
Hi Lance,
You can still distribute to the company, even after making a family trust election, as long as the company is controlled by the members of the family group. eg, if you and your partner were the directors and shareholders of the company, you would be fine.
It would be best to set the beneficiary group as wide as possible, then you don't need to have the deed altered later on, to add beneficiaries. The trustee can then choose who receives a distribution and who doesn't.
freelance2020 wrote:It was my understanding that Discretionary Trusts can nominate multiple Trustee's, so that would include family members, my partner, myself and a company. As long as I have nominated properly I should be able to alternate between beneficiaries at my discretion.
Hi Lance,
The trust can nominate as many beneficiaries as it likes, which is what I think you mean.The trust, in its deed sets who can receive distributions from the trust income, and 'benefit' from the trust. The deeds are usually set so that you can choose to distribute to yourself, your kids, your parents, nieces, nephews, and any other entities associated with you, like other companies etc.
The trustee is set at the time of commencing the trust, and can be changed later on if you wish. The trustee can either be yourself, yourself and a partner, or a company trustee, with you as a director.
The only other consideration for loss making trusts is the Family Trust Election rules. If you make a trust election, it limits who you can distribute income to in future years, to the family group of the nominated individual. (including parents, children, siblings etc)
Cheers
Scamp wrote:How does a 22-year old get their hands on 400.000 dollars of debt ?
Sorry but there's something really wrong about that picture.
Whoever gave you that amount of money should be sued for child cruelty.
And YOU should know better than to get a 400.000 dollar mortgage !!He said he paid $400k for the property, not a $400k mortgage. He may have $100k saved, as far as we know.
