Forum Replies Created
It really depends on your personal circumstances, and how much you want to move.
I'm assuming you don't have to sell to buy the new PPOR. The question I'd be asking is, could the capital tied up in the current PPOR be better used elsewhere?
If you decide to move, I would probably sell the current PPOR, take my capital gains tax free and put the cash in an offset account attached to the new PPOR. Then it is available to use as a deposit on a new IP when you wanted it.
coolcup69 wrote:Dan42 wrote:3) The easiest way is to not include the sale in your tax return.Thanks Dan42. In relation to your response on point 3, could you elaborate a little further on "easiest way". Does this mean there are a variety of methods? I just want to make sure I take the least tax risk on this front.
Thanks again everyone!
Sorry, I wasn't very clear. The sale of your PPOR would not be included in your tax return, as it is an exempt capital gain.
Packer wrote:What is the 6 year CGT exempt rule??
I thought you had to live in it for 12months before
you void CGT on sale!
Or is that a W.A thing?You do have to have lived in the property, but there is no set time.
The '12 months' you are thinking of probably relates to the First Home Owners Grant.
Hi there,
Welcome to the forum.
To answer your questions;
1) From the information you have provided, yes, the sale of property A would be CGT free
2) Not necessarily, you could still elect to call Property A your principal place of residence, even if you have moved into Property B. It just means Property B won't become your main residence for CGT purposes until Property A is sold.
Property A would need to be sold before it has been rented for 6 years, to be totally CGT free.3) The easiest way is to not include the sale in your tax return.
The 6 year rule doesn't apply, as you have bought another PPOR.
You can, however, elect to call your first PPOR, your PPOR for the entire time you owned it.
If you do this though, your current home will be subject to CGT when you sell, for the period from when you bought it, to when yousell the first PPOR.
It's your choice as to whether you want to pay a small amount of CGT now, or an amount later on when you sell the current PPOR.
Your offer price should reflect your research, not a set percentage below the asking price.
We have just bought a house at the asking price, after having our initial offer rejected, because our research showed it represented good value. The IP we bought in 2009 was bought 10% below the asking price, because it was what we were willing to pay, and the asking price was too high (according to me, anyway).
Each situation is different, do you own research and you'll come up with the right price for you.
PS – I would also disagree with adding a premium hoping to hook someone who doesn't know what they are doing. Whilst doing this, the people who are looking to buy are looking elsewhere, because your house is too expensive. Better to price it properly and attract some interest, rather than letting the property go stale, then reducing the price in a month or two anyway.
Assumption – you purchased the property before August 1996.
At worst, only 1/4 of the gain would be assessable, and you would get a 50% discount for owning the asset for over 12 months.
As Terry said, you could choose to claim a full exemption, but this would mean your new house would be assessable for the first 5 years, as you can only claim one main residence at a time.Hi there,
To me, the decision comes down to non-financial factors, because there are pro's and con's for each scenario. With another IP, your interest is deductible, but you also pay CGT when you sell. With a PPOR, no interest deduction, but no CGT either.
For me, I would choose the PPOR way, mainly because I am a home-body, and enjoy living in my own home, with no (ok, minor) hassles. I don't have to ring the agent every time I want to hang a picture on the wall.
Another option is to look at buying a PPOR where you can add some value through renovations. THis way y9ou get your own home, but a reasonable investment as well, which will be CGT free when you sell.
Hi Natalie,
There is a 6 month overlap period, where you can have two PPOR's. This was introduced for the very reason you describe, for people who have bought a new PPOR before selling the old one.
The only complication is the fact that your current PPOR is being rented. The 6 month rule does not apply if :(b) your existing main residence was used for the * purpose of producing assessable income in any part of that 12 month period when it was not your main residence.
s118-140.The other factor to remember is CGT is based on contract date, not settlement date, so a 'security swap' at date of settlement will have no effect on CGT.
If you sign the contract for sale of your old PPOR BEFORE you sign to buy your new PPOR you will have no CGT to pay.
Wow – $700 down to $18! That's some good negotiating by you.
Lease renewal for the same tenant shouldn't cost a weeks rent, because there is hardly any work in it. For a new tenant, that's fair enough, but not to extend the lease of the same tenant.
If you purchase the PPOR in a trust, you lose the CGT main residence exemption. That's the main one.
Depending on what state you are in, there may be land tax payable. In some states, trusts don't receive the same thresholds that individual owners do, and PPOR's are generally exempt from land tax (in individual names)
Even though it's hardly ground breaking reform, getting rid of exit fees is a good idea. There are plenty of posts on this forum of people stuck with loans from second tier lenders, because of the outrageous exit fees. If they can't survive without the ransom of large exit fees, then good riddance. You can't have a sytem where the big 4 are getting a kicking for charging $700 exit fees, but RHG are able to charge $7000 exit fee to their poor customers.
markymarko wrote:To get full tax advantages and have a good exit strategy in regards to CGT, what name should I have the property under and what name should I have the IP loan under? I am guessing the property can be under both and the IP loan under mine so I can claim max tax benefits. Is this correct?Thanks for your help
Unfortunately that is not correct. If you buy the property as joint tenants, you will each have a 50% share of the property. Therefore, you will be each entitled to 50% of the income and 50% of the expenses. The interest on the loan is deductible dependent on the purpose of the loan, so the ownership in the property determines the percentage of deductibility, not the names on the loan.
You could buy the property as tenants in common, and this would allow you to, say own 75% and your wife 25%. (Or 90 / 10, or 80 / 20 etc) The income and expenses are then apportioned along those ownership lines.
jcar11457 wrote:The owner is a friend of mine, and I trust them, it appears they need this for their tax purposes.They going to issue me receipt for all payments and looks like they going to keep the bond themselves.
All I want to know is if we all agree, this should not be an issue?
Cheers all
Why would they need this for tax purposes? Your friend is trying to shonk either the tax office or you.
25% seems a big jump in that area. I'd be doing some of my own research, not just relying on the vendors expectations. I'd also want to see what the rent is first.
Personally, I'd be looking a bit closer to the city. Or on the south side. (St Marys, Darlington etc)
Did an accountant or tax expert give you this advice? Unless you are using the land for a PPOR, there is no difference with buying in your own name or the name of a trust. A trust would have many advantages, such as the ability to distribute income and asset protection.
The '12 months' part is correct, because assets held for over 12 months are only taxed on half of the gain when they are sold. Note, this exemption does not apply to companies.
I'm not sure what small business exemptions your advisor was talking about, but whether there is a small business or not on the land makes no difference to the CGT calculations. You may get some other business deductions, but these may cost you more than you are saving in tax.
Merca wrote:If it is usual in Australia to settle the trust with only $10, using a Joe Blow, in order to reduce stamp duty, how are the remaining assets introduced into the trustee's control? A loan from the holder of the funds, or does he gift it to the trust?Merca
Yes, it is very common. Most trusts are now non-revocable trusts, and the settlor can not be a beneficiary.
Funds are generally loaned to the trust, and are deemed to be available on a 'at-call' basis. Generally interest is not paid, as the loaner of the funds doesn't want the extra income. They are generally setting up a trust to help minimise tax, so the interest is generally not charged.I'm not going to labour the point, AGAIN, but it's $32,000 according to the hurried DCF, OVER 30 YEARS!!!!
And that is only if the fees are put back into the loan. It is not YOU returning $32,000 to the client, the wonder of compound interest increases the savings.
If the client took the cash instead of paying off the loan, the saving, assuming the loan was kept for 30 years (when the average length of a loan is about 7 years) would be a couple of grand at most, or about $100 a year. The client could get the same interest saving by paying an extra $10 per month into their loan. Do you advise your clients of this?
By not explaining how the savings work in your posts and just throwing out a huge dollar figure ($80,000 by your calcs) you are misleading and deceiving the people reading your posts.
I'm sure you are smart enough to know how the savings figure is calculated. By conveniently ignoring the wonder of compound interest you are doing yourself a disservice.
mortgagedetective wrote:Gidday Alistair,So what you are saying is your client paid you a fee for service as a financial planner to get advice on income and loan structure as he could have done with any other suitably qualified and licensed planner.
If your client were a prudent investor as you seem to suggest, why wouldn't he have simply taken this advice (given he has already paid you a fee) and used any of the mortgage brokers that rebate their commission to broker the loan? That way he would get the best of both worlds and you still get your advice fee which seems like a pretty fair deal all around.
To get commercial advice, then go elsewhere just to save a few bucks is hardly 'prudent', it is unethical and poor business practice. Are you really promoting that sort of behaviour?
The rebating broker would be benefiting from the original broker's work. I'm sure you wouldn't rebate any of the trails to the original broker who has done all the hard work.
The trustee (company) is the legal entity, so this is the name that will appear on the title.
