Forum Replies Created
Bravo.
What annoys me is the condescending nature of the 'world is ending' posters. According to them, they are right and everyone else is an idiot.
If they have that opinion, fine, but please respect the rights of others to have differing opinions.
Scamp wrote:I was looking for my previous posts , only to find that they all got deleted.
A shame, because there was some very interesting reading and warnings in there, also some nice replies from people. It was titled something like "Do not invest now, the property market is crashing" and was posted about a year ago.I wonder why an investment forum would have deleted that post…
The world is so much worse off, not having the wisdom of Scamp to rely on, in these dark and stormy times. How will I sleep tonight??
Don't listen to the 'prophets' who have predicted a 50% loss of value in median prices. There are plenty of areas where growth is predicted for the 2009 year. See Fridays Fin Review. Like you say, yields are high an interest rates are low, and you can get good growth in some areas. Just do your homework before investing.
And pay no attention to the losers on the GHPC forum, which, incidentally, doesn't seem to be working anymore. Another conspiracy, perhaps!
M3,
How do you know it's making money? If the owner is showing a loss to avoid paying tax, why do you think he is being honest with you?
If you are keen, you could get your accountant to do some sort of audit on the figures supplied by the owner. If the owner is keen to sell, he should allow the audit. If he doesn't, then you know something is up.
Depreciation – It depends on the cost of construction, how old the building is and what can be depreciated inside the building (stove, air conditioner etc). You can get a decent report done for $400 – $500
Stamp Duty – Different states have different formula for calulating S/D. In SA the govt has a stamp duty calculator on one of its websites, I'm sure it would be similar in other states.
Dan
Generally, you can offset capital gains against revenue losses.
Hi Belinda,
One thing you can do is engage a quantity surveyor to assess the items in the house that can be depreciated. Also, keep a record of the kilometres travelled to and from the investment property.
Just to clarify, the 6 year exemption is ONLY available if you do not buy another PPOR in that time. You can only claim one house as your main residence at a time.
Like WJ says, you can rent it out anyway you want, it has no bearing on the CGT rules.The deductions are reduced by the amount of time the property is not available for rent. In your example, the deductions would be reduced by your private use amount of 2 weeks use/52 weeks, or 3.8%.
dirty sanchez wrote:even when i can redraw from the loan at a click of a button ?Yes, because the test for deductibility of interest is, what were the borrowed funds used for? As, in your example, they would be used for a new PPOR, the interest on the redraw would not be deductible.
Paul,
My question is, what are the funds from the LOC being used for? Is all of the $200k from this loan to be used for the IP?
Hi Terry,
You've got me thinking now!
We have completed trust tax returns for clients with a rental loss and capital gain, and it was fine to offset the income loss against the gain. You couldn't stream the income, eg give the gains to someone and the revenue loss to someone else. As long as the beneficiary received an overall amount of distribution, it was ok.
I'm not 100% sure, but I think this may have changed only in the last year or two. I found this on the ATO website, which shows a similar situation:
Debra's trust distribution shows that she received $2,000 as her share of the net income of a trust.
This is made up of a primary production loss of $5,000, non-primary production income of $2,000 and a net capital gain of $5,000. (The net capital gain does not include any discounted gains.)
At the partnership/trust distributions section of her tax return, Debra will show a $5,000 loss from primary production and $5,000 non-primary production income (that is, $2,000 non-primary production income plus sufficient net capital gain [$3,000] to offset the loss from primary production).
Debra takes her remaining $2,000 net capital gain ($5,000–$3,000) from the trust into account in working out her net capital gain at the relevant item on her tax return.
So Debra has received an overall income loss from the trust, offset by capital gains.
Dan
Terryw wrote:Hi Daniel
$8,000 per year is a big loss!
Did you know that CG cannot be offset by income losses? I have never had an income loss so am not too sure how it works, but this is something you should discuss with an accountant.
What I think it means is, using your above example, you will have to distribute the $120k capital gain and still keep rolling over the income loss in the trust until other income can be used to offset it. The 50% CGT discount can apply to the CG if it is distributed to an individual.
Hi Daniel,
This is not correct. Capital Gains CAN be offset against income losses. It is only Capital Losses that must be offset against capital income.
You mentioned that your accountant quoted you $1000 for a trust tax return / financials. This seems high to me. For one rental property in a trust, you should be able to get it done for about half of that.
Dan
keiko wrote:Hi if a house that i live in i sold in 12 to 24 months of purchasing so i dont pay capital gains tax and i keep doing this every 12 to 24 months of purchasing the next property i live in, And lets say iam paying 6% interest. And lets say over 10 years ive owned and sold 7 property's that i have lived in and i did not pay capital gains tax. would i be better of.
Or would i be better of to buy these and hold them all as investments. and pay tax on them in 10 years.But keep in mind i will already have other investment property's.
so iam pretty much saying i can pick up 100% cgt each time i sell a property that ive lived in or i can live in 1 property over 10 years and get 100% cgt on that and keep the other 6 as investments an pay tax.
which way would be better?Your question can't really be answered without more details, such as capital growth, long term interest rates etc, and would be almost impossible to predict anyway.
Buying and selling every two years would be an expensive way to go, as you would pay stamp duty, loan fees etc on all your purchases, plus agents fees on all your sales. You would also miss out on all the rental income of option two, plus the tax breaks of deductible interest, and holding the properties means you only pay CGT on half of your gain.
Plus, I wouldn't want to be moving house every 2 years, it would drive me crazy.
Just in response to Terry's comments, the administration costs of running a DFT are higher than if you were to purchase the propertiy in your own name. A discretionary trust requires minutes, and generally financial statements are prepared by the accountant as well.
For one property it wouldn't cost much more, but it would be more.
Daniel,
Did she mention the problems with HDT's and the ATO taxpayer alert? This is the main reason accountants are steering their clients away from Hybrid Trusts.
I'm not sure of how she worked out the amount, but the running costs of a DFT are higher, expecially if you have a corporate trustee, due to the ASIC fee, preparationof minutes, financials statements etc. Is having one property in a DFT the same costs as having six in your own name? I'm not too sure about that.
It sounds like the most important thing at the moment to you is getting the tax breaks for negative gearing. If that's the case, then buying in your own name may be the way to go for you. But this strategy could mean you pay more tax than you need to in the future, especially if you build your portfolio.
A Unit Trust could POSSIBLY get you the interest deduction, but the problem with this is the income from the trust is paid to the unit holders in proportion to their unit holdings. If you own all the units, to get the interest deduction, you also get all the income.
I'd look at a discretionary trust. As Richard says, at the moment interest rates are low and there is more cash flow neutral property around than in prior years. Any initial losses are locked in the trust, and distributions would be made after those losses have been used up.
If you have minors you can distribute to, you can distribute the first $2666 (for 2009 year) to a minor tax free (dependent on your trust deed),
If you are planning on buying and holding, and adding to your portfolio, I would look at the Discretionary Trust option.
PosEnterprises wrote:So why do Accountants keep saying that HDT's are a better way to invest if you intend on building a portfolio.
Now that the ATO have made their feelings known, I don't know of any accountant that would recommend a Hybrid Trust arrangement.Yes you can backdate the date of registration for GST.
Firstly, the ATO are looking at the deductibility of interest for hybrid trusts. This taxpayer alert was released recently, citing the ATO's concern with the deductibility of interest in this area.
For depreciation, if the trust owns the IP, then any deductions for depreciation remain with the trust.
i would be very wary about setting up this type of arrangement at the moment. Get good written advice before you set up this type of structure.
Dan
