Forum Replies Created
Hi Carly Boy,
Any property with a construction commencement date prior to 18th July 1985 does not qualify for building depreciation unless some structural renovations have been undertaken in the interim.
You have overlooked a key piece of information – the purchase date as this helps determine start up value for plant and equipment items.
Plant and equipment is loosely described as everything else not forming the fabric of the building. These have a start up value at time of purchase and depdning upon their age and value may be worth considerable tax claims under low pooling guidelines and the like.
I suggest a conversation with a qunatity surveyor (Scott AKA Depreciator) and he will be able to determined the economic advantages of a depreciation report or not.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Gail,
There are variations in state standard practices so it may be helpful if you identified the state in which you are buying.
For example all of my purchases in WA have been completed using a conveyancer – all straightforward and no problems whatsoever.
My Queensland purchase was with a solicitor who specialises in property settlements and who is attached to a law firm.
In all cases as the transactions were straighforward there were no issues. In complex ‘deals’ a socitor may be advisable but in my experience and opinion not essential for the run of the mill purchase.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Dragonlady,
I must say I am not an accountant and as such it would be worthwhile running the scenario outlined past your accountant too.
As you have exceeded the 6 month dual PPOR clause one of the properties is going to have a 7 months CG liability – in the grand scheme of things this is really quite negligible and as such I wouldn’t be overly worried about which of the two properties is the PPOR in the overlapping period.
To my way of thinking you are better off claiming the interest as a deduction rather than as a capital cost (I don’t bleieve this is possible anyway) as you’ll get the refund now and any subsequent CG liabilities will be in tomorrows $.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi James,
Only speaking based on my experience – was contacted by a long serving moderator (our paths had crossed a couple of years ago on other forums) and asked if I wanted to assist here. Since then I have been contacted by one the site employees (is that the right description) and invited to act in the role of moderator. Apparently a couple of existing moderators had ‘nominated’ me.
As for others – I don’t know – I assume the process was similar
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Gataga,
Thanks for that – all I can offer is make sure you are entering this arrangement with all factors considered. Have you, your mother and brother sat down and explored all of the ‘what ifs’, ‘buts’ and ‘maybes’ about a joint purchase.
If there is a huge discrepancy between purposes for buying thisproperty and what your individual moves thereafter are going to be then complications may arise.
Based on Simon’s information it would appear that your mother and/or brother (assuming she has previously owner a home) may negate you capacity to qualify for the FHOG.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi folks,
Thanks for the kind words – just doing what I enjoy – talking property and if I can give something back then I have done my job.
PS Kay – Brent and Steve are still working out where to put me and have realised there is a lot of hot air inside me (thanks Simon) – at the moment I am checking Steve’s Tip For the Day to ensure it complies with all relevant protocols.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Brahms,
MI is considered a borrowing cost and as such is claimable over five years or the life of the loan whichever is the shorter period.
Edit insertion ‘They (borrowing costs) also include other costs that the lender requires you to incur as a condition of them lending you the money for the property – such as the costs of obtaining a valuation of lender’s mortgage insurance if you borrow more than a certain percentage of the purchase price of the property”
From ATO Rental Properties guide 2002 – 03.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Kumar,
There is no definitive answer as each individual’s circumstances are different – the correct course of action for you will be dependent on your situation and what it is you are trying to achieve in the short and long term.
Some things to consider are family situation, work prospects, location, your investment preference/goal, years to retirement, serviceability issues, income levels, risk tolerance, beliefs about the market you are looking at, your reserach in the market and so on.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Dom,
Just clarifying so we are speaking the same language.
Assume work related income is $40K, rental income is $20K, no work related claims and rental claims $25K.
Gross taxable income in this example is $40K + $20K – $25K = $35K and not $40K.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi James,
I would argue the property was fully available for rent from the 16/1 and a such costs and incomes shold be apportioned from this date.
I am assuming the period 10/1 – 15/1 wasn’t available for rent due to the work being done.
However in terms of CGT liabilities the ‘date’ becomes a little messier. Recommend a look at the ATOs website to determined CGT issues – there is a short window of time when you are entitled to have two PPOR but I am not sure if it applies here.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi JV,
We are currently at a point in the market where rental returns are very low. This combined with the interest rate rises of late 2003 means the likelihood of you finding something that qualifies as positive cashflow as per Steve’s 11 sec rule in Perth is very remote.
As such some people are venturing out into the ‘sticks’ for these properties.
In my opinion something in the metro area with good growth prospects is a better bet. With depreciation, interest only loans and an effective broker the cashflow situation can be reasonably managed.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Dragonlady,
Provided the property was available for rent then you are able to claim all relevant costs including loan interest, rates, taxes, insurance, repairs etc.
If however you moved into the property these costs would not be deductible.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Residential Wealth,
Just a minor clarification – Average wage across Australia for males was $49600 and for females $41900 in January 2003 (source ABS)
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Dianne,
I would suggest that you ring the property manager and discuss your concerns with them directly and if you are still not satisfied then move agencies – as a word of encouragement finding the first tenant always seems to take the longest. Historically mid-winter is the slowest time to fill vacancies.
As for selling – doon’t panic – you bought the property as a result of your research – nothing has changed. It is still a good property.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Dom,
As Rob indicated you didn’t tell us whether or not your annual incomes $40K & $30K were wage/salary only or were gross taxable incomes inclusive of net rent.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Rob,
The exemption from stamp duty is a state matter and a call to the state revenue department is the best cours eof action. I believe Victoria allows for transfer of titles between husband and wife without stamp duty penalty – NSW ?
I understand the ATO is less lenient and as such any change in ownership will trigger a CG event.
Definitely recommend a call to the ATO.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Originally posted by BEAR1964:And then once the beach property is rented oout can i then claim the interest on such property on tax?
Regards Bear
Hi Bear,
You will be able to claim all the usual expenses from the period that the proeprty becomes income earning, but you will not be able to claim for expenses previously incurred when you lived in the property.
Assuming the property is your only PPOR at the time capital gains will be exempt (don’t forget the 6 year rule) from tax and apportioned over the total life of the property.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi all,
Trying to tidy this up a little – please be aware I have no qualifications in accountancy and as such a discussion with your accountant and/or ATO is advised.
Capital gains is levied in accordance with proportional ownership as determined by the names on title documents. Joint ownership = 50/50 and tenants in common as shown. Whatever is shown on the title documents must be declared on appropriate tax returns.
Capital gains are added to a taxpayers gross taxable income. As such the gains can be reduced along the lines of Terry’s suggestion (assuming Dom has another property) or by offsetting the gain with the sale of loss making assets.
In Dom’s example he indicates a gain of $210K – if he were to sell another asset and made a loss of $50K his total realisable gain is now reduced to $160K – assuming all assets are jointly owned.
To highlight the diffference between selling all in one year and spacing the sale of the three properties out over three different financial years I have done some rough maths.
Note these are not totally accurate as I am not aware of percentage of ownership or if rental income is included in income figures given.
In a normal year Dom earns $40K and pays tax of around $8250, Mrs Dom earns $30K and pays $5250.
If the properties were sold in a staggered fashion (one per year for three years) and assuming $70K gain on each and no further growth Dom’s income would be $57500 (tax $14160) and Mrs Dom $47500 (tax $10500) in each of the three years.
Total 3 year bill – Dom $42.5K and Mrs Dom $31.5K.
If the properties were all sold in one year the total gain is $210K. As the properties are held for more than a year only $105 is included in tax calculations – of which $52500 is added to Dom and Mrs Dom’s income.
As such in this year Dom’s gross taxable income becomes $92.5K (tax $30360) Mrs Dom’s taxable income $82599 (tax $25660).
Three year total tax bill (1 big bill and 2 normal bills) Dom $47K and Mrs Dom $36K.
As such selling in a staggered manner will save Mr and Mrs Dom, between them a total of around $10K.
Whether or not this is the best decision in the context of the big picture only they will know as the a bulk, one off injection of funds into their home loan could realise significant savings in non-deductible PPOR interest.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Pisces,
As I understand it capital gains are added to your taxable income and levied accordingly.
As such realising all of your gains in the one year increases your gross income and as such you’ll be up for more tax.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
Hi Dom,
Option 2 would only apply if you had made some losses on other recognised investments property, shares etc.
If all of your investments have made capital gains then this option isn’t available to you.
Derek
derekjones1@bigpond.comProperty Investment Support Available. Ongoing and never stopping. PM welcome.
