Forum Replies Created
For about $500 I would get my own done independently.
Seems too many people were onto this and the ATO has reacted to a growing trend. In some ways it is a bit like drug testing athletes – the drug testers are always playing catch up.
Ashley – I read this ruling slightly differently to you and that is the issue being the parking of rental income in an offset account rather than in an 'operational' line of credit. Be interesting to see how things evolve from here on end.
Tis an interesting observation.
A number of local businesses have made the same observation. Interestingly enough there have been a few articles surrounding this topic in recent national papers. One article which caught my attention was this one http://tinyurl.com/3q7yz86 from 'The Age'
Hi Jess,
Our is at http://eosproperty.com.au/blog
Some people get off trying to bash and bully their way forward without consideration of others and these people could be using this strategy to cover up for their mistake. Reading your post and without seeing your contracts I think you are safe.
But get legal advice. Small cost big benefit – you either find out you aren't liable = no worries. You find out you are liable = work to reduce exposure.
Other comment – don't make any more concessions without first speaking to a legal beagle.
Any concessions, on your part, could be construed to be acknowledgment of error on your part.
Best bet is to ring some other similar managers in the area and see what charges they have. On top of this the relevant state real estate authority website may have some information.
As a rule of thumb you will find osm + holiday rentals will be on the high side anyway.
Not all relationships stand the test – this to me is a greater worry.
But – tenants in common is often used to weight ownership so higher income can access more claims this helping with the tax situation.
Weighting ownership (for example to 75/25 split) means the person with 75% ownership gets to claim 75% of all costs but must also declare 75% of all rental income. If the property is negatively geared then the person with the higher income (if they are in different tax brackets) should have higher ownership.
If the property is positively geared then the person with the lower income should have higher ownership.
Hi Jodie,
Not a broker – so listen to the experts.
I assume your loans are cross collateralised – when banks have a second mortgage this is normally the case.
In your instance your total assets are worth $590K with debts totaling $450K. At this level your loan to value ratio debts/assets is 76%.
If you refinanced your loans up to 80% this would release a further $22K which you could place in a line of credit and which could be used as a deposit on another property. The loan for this next property could be sourced at a different bank.
Now you may be thinking $22K isn't much of a deposit – can we get more?
Banks are sometimes happy to lend more than 80% of the value of your assets if you prepared to pay lenders mortgage insurance. If you are self-employed you may experience some difficulties going over 80%.
Let's assume you want to extend your refinance to 90% (as an example) this would provide you with up to $81K available funds as follows: 90% of $590K (property value) = $531K less existing loans of $450K = $81K available.
From this you would need to pay LMI of around 2% (sometimes less – sometimes more). In this instance your LMI bill may be in the vicinity of $10K which still leaves approx $71K for deposit money.
Irrespective of which way you go using a line of credit strategy like this can allow investors to take their business to another lender.
But – this is important – you need to be working with a broker.
If they both 'own' the property then both names should be on the title.
If there is a huge difference in income levels and contributions being made towards the property then a tenants in common arrangement with unequal ownership ratios may be suitable.
End of the day they are buying the property together and having both names on the title is fundamental – it provides greater protection should the relationship end.
I have no issue with FHOG helping kids get into their first home has to be an admirable aim.
I have great issue with the FHOG Boost scheme of a couple of years ago. The total subsidy available was too great and meant some people could buy a property with literally little or no money down. (This was more the case in the early stages of the boost scheme when banks were still lending at high LVRs)
The boost scheme and subsequent rises in interest rates have seen some of those 'fortunate' soul caught up in varying degrees of financial distress.
I see the perennial chestnut of 'negative gearing' has once again reared its head.
This happened in 1985 and waiting lists for NSW public housing went from 80K (1984) to 110K (1985) to 115K (1986) and 140K (1987) before dropping to 120K (1988). At the same time rental returns blew out to 12% in Sydney alone during the period negative gearing was removed.
At the same time those of us who owned property pre-1985 continued to receive full tax deductions on interest for any properties they owned before negative gearing was removed. The legislation was not made retrospective.
The Federal Government of the day recognised they still needed to encourage property investment and offset the removal of negative gearing with the introduction of a 4% capital allowance for depreciation.
Swings and round abouts really – do the math.
Key question – what does Nana want?
Seems the post is all about the 'kids' – does nana have a stated opinion?
Only the interest costs associated with a loan are deductible.
Any principle is considered a repayment of capital and therefore not deductible.
Maccacha wrote:we've met accountants who will do our tax but are not keen on giving financial advice/planning, we have also met Financial Planners who'll give financial advice on shares, super & insurance etc but don't want to have anything to do with properties…………….Hi Maccha,
You'll often run into this problem as legislation in 'recent' years has restricted what some people can/can't say.
Direct property is not considered a financial product and thus falls outside the realms of a financial planner. On the other hand your accountant may only be qualified as an accountant is not allowed to give property advice.
Property is an asset class that currently falls through the cracks – this will explain, in part, why you are having problems finding a property advisor.
It can be done – if you are committed to it.
I have 19 yr old niece who has just put an offer on a block of land in one of Perth's northern suburbs. She has been employed for just over 12 months and is on $35K. Her brother is still at uni and has his own 2bedroom apartment in another suburb closer to Perth.
The nephew got a kick along with the FHOG boost scheme while the neice received a $7K and stamp duty allowance.
Both are hard working industrious types and have been educated and guided by their parents very well indeed. THeir parents are prepared to guarantee/lend some funds to help the two kids get started but it must be said in both cases the kids saved their deposits through hard work and some successful short term investing in property developments.
Makes me look at what we are doing with our two kids.
Was there any FHOG discounting of statmp duty on the second property. I understand some people claimed FHOG on one property in one person's name and then repeated the process in the second persons name.
If not then OSR is only interested in the value of the property at time of purchase. Whether or not it is an investment proeprty or home is largely inconsequential – excepting comment above.
The second property will be treated like any other property – declare all income and claim all expenses.
You may also wish to consider organising a depreciation report for the property and speak to the bank about converting the loan for this property to interest only if not already done so. At the same time if you haven't applied either of these to the first property it would be advisable to do so.
Just adding a slightly different perspective – all of your time lines (stated and experienced) to date have been very short. Property is a longer term investment so I would counsel you to think longer, rather than shorter, timeframes of around 10yrs or so.
wafti123 wrote:the fact that tax benefits aren't that hugeIts not all about tax benefits – if your tax benefits have declined/disappeared all it means is the property is closer to paying for itself.
Any tax savings should be considered as icing on the cake and not the cake itself.
If tax savings are an issue – go out and buy another property.
wafti123 wrote:can you claim the cost of replacing a fridge in a rental?Any residual value of the 'old' fridge can be claimed against income.
The new fridge becomes depreciable according to the relevant section of the ATOs depreciation schedules.
rich_99 wrote:1) source new properties,2) provide ongoing management of property
Are these deductible against rental income?
1. Capital cost used to offset any CGT liabilities.
2. Deductible – but questions may be asked if you claim a truck load of travel expenses and have a property manager.
Edge3183 wrote:My questions:1) If we move into my parents, does our current property qualify as an IP immediately after we move out (ie – so we can claim the interest as a tax deduction from the start of April?).
2) If the answer to 1) is yes, how do we prove that we have moved out? Is a mail-redirection enough? Because we will only be at my parents for a short amount of time, we really don't want to have to go through the process of changing address details on every single thing twice (once is enough!)
As both of our incomes are relatively high, and is the mortgage on our current property, any strategy we can employ to maximise our deduction for the 2011 financial year will make a fairly significant difference.
1. My reading of rental property guidelines about deductibility suggest the property must be available for rent. Note this doesn't necessarily mean it is rented just available for rent. You'll be able to use any agreement you take out with a property manager as proof.
2. Your mail can be easily handled with a redirection order which can be organised at the post office. Put your folks address on one submission and then the address of your new house on the second one.
Maximising tax deductions can be achieved by gfetting a depreciation report done and secondly paying interest in advanced for the property in June. Be a little wary of this as you still need to have a 'business reason' for paying interest in advance.
