I don’t know all that myself, but I believe that you apply to defer your Uni Fees (govt. pays for you) until you finish studying and are earning an income.

Once you start earning an income (I think it’s $35,000) you start repaying your HECS debt. Your compulsory repayments are determined by your taxable income and you repay a percentage of this income. Eg: $35,001 – $39,000 is 4% (or used to be).

So if your taxable income was $36,000 you would repay 4% of that ($1440). This process is repeated annually until the debt is gone.

The website Going to Uni may help

There are a few items that can be claimed.

• Interest & fees charged on loan
• Property management fees
• body corporate (for units)
• council rates
• water rates
• depreciation
• repairs *

Here is a link to a previous post on depreciation.

* Repairs vs improvement is a tricky subject. You can claim a repair, but can only depreciate an inprovement. An example…the element in your property’s hot water system has blown. If you replace the element, this is a repair and can be claimed. If you decide to replace the enitre HWS, (such as upgrading the size of the HWS) this is classed as a capital improvement and can only be depreciated. An accountant or Quantity Surveyor can help in this area.

Hope this helps for starters.

Hi,

Good topic, I was just about to post a similar question.

My Management fees are 11.5% + GST (in Darwin)

That is one heck of a drain on the rental income, and I didn’t realise how high theses fees were until I read this post. I have been thinking of shopping around with other agents to compare fees. Just wondering if I changed management do you think it would upset the tennants?

I believe that is correct….although it is hard to think of when investing like this as a couple (husband & wife). What I mean is that buying as a married couple is different to buying with your brother/sister. In your example you would own 99% of the property and therefore be eligible to claim 99% of costs, depreciation, etc.

But, from what I understand, there must be a legitimate reason for setting up a structure like this, especially since it results in an uneven distribution of income/expenses. Because it is your wife, the ATO may say why not 50/50, or why not all in your name? Whilst you may be able to legally setup up such a structure, the ATO may not let you claim in those percentages. Unfortunately, maximising deductions is not a legitimate reason.

Another point to note with this structure, unlike Joint Tenants, in the event of your death or incapacitation, your share does not automatically default to your wife. You must specify in your will where you want your share to go.

As Jofus said, best to check with an Accountant.

Hi,

I’m certainly no authority on this subject, but I’ll try to help. I have learnt what I know through reading many books on the subject.

I can recommend the use of a quantity surveyor. They will provide you with a list of all depreciable plant and equipment in your property, their value and the effective life of those items. This information can then be used at tax time for depreciation.

The ATO has a list of plant and equipment and has outlined their “effective life”. For example, a hot water system has a life of 20 years and so the value (new or current value as per the quantity surveyors report) can be depreciated at a set rate over that period.

There are a few methods available to depreciate plant and equipment….the two common ones are Diminishing Value or Prime Cost. The rates of depreciation are different for each method.

Diminishing Value
Calculated by the following formula;

Current Value * (Days Owned/Days in year) * (150%/effective life)

So in the Hot Water system example…if it was currently valued at $400 and you had owned the property for the entire year….

= $400 * (365/365) * (150%/20 years)
= $400 * 1 * 7.5%
= $30

Next year the value would $370 ($400 – $30)
The following year $342.25, and so on.

As you can see, the value you claim decreases over the life of the item.

Prime Cost
Calculated by the formula;

Cost * (Days Owned/Days in year) * (100%/Effective life)

In the case of the hot water system….

= $400 * 1 * (100%/20 years)
= $400 * 5%
= $20

So with the Prime cost method, the deduction remains the same value for the life of the item…in this case $20 per year for 20 years = $400.

However, if the item is not new, a quantity surveyor will be able to give you the item’s ‘remaining life’. So the water heater may be 6 years old and has a life of 14 years. Therefore it could only be depreciated over the next 14 years based on the current value.

Wow, this is confusing…I hope I make sense so far?

Low Value Pooling
Once items of plant or equipment reach a value (or the new cost) of less than $1000, they can be added to a “Low Value Pool”. This in reality is a paper exercise, but it lets you depreciated these items a total dollar figure rather than a individual item. The depreciation of the low value pool is via the diminishing value method at a rate of 37.5%.

Items under $300
Items costing or with a value of $300 or less can be written off in total in the first year.

Special Building Write-off
Here again the quantity surveyor can help. You need to know the construction cost of the property. The date of construction is important, but if the property was constructed after 18 July 1985 then you are able to depreciate the building. the rate depends on the date of construction…

18 July 1985 – 15 Sep 1987 : 4% per year over 25 years.
16 Sep 1987 – current : 2.5% over 40 years.

So a property built in 1996 and costing $50,000 (construction cost, not purchase price) can be depreciated at $1250 per year over the next 32 years (40 – 8 years).

However, the special building write off has implications with respect to CGT. Basically, any depreciation is deducted from the original purchase cost for CGT assesment. In the example above, you have claimed the special building write off since it was built. You purchased the property for $100,000 and sold it for $200,000.

For CGT purposes the you new actual purchase cost is;

= $100,000 – ($1250 * 8 years)
= $100,000 – $10000
= $90,000

Therefore for CGT your profit is $110,000 ($200k-$90k) not $100,000. Please note that there are more factors and costs to be included in this calculation, for simplicity I have neglected those. I’m not saying this is good or bad, just something to consider.

Reference claiming depreciation for past years, I am fairly sure you can claim the special builing write off for years past (up to 3 years I think). For your Canberra property, I think it would be too late as you no longer own the property…. best to check with an accountant on that one.

A couple of books that I have read clearly explain all this;

“Rental Property and Taxation” by Tony Crompton is very good.

The following links to the ATO site should help with a bit (lot) more info…
Guide to depreciating assets 2003
Low Value Pool
…assets costing less than $300
Rental Properties 2003

Well, that’s about it. I hope this has all made sense and has helped.

Greg.

As far as I know there is no Land Tax in the NT. Look here for some info.

*Edit* Found another site..definately no land tax in NT (also no stamp duty on mortgages). Territory Revenue

Are you talking about the 11 sec solution? Or in general?

11 sec solution…divide purchase price by 1000 then multiply by 2 gives you the rent required to meet this rule/guide.

eg: $60,000 purchase price…../1000=60…* 2 = $120 per week to meet the 11 sec solution.

If you are talking generally, then ask local real estate agents what the average rent in that area is for you particular property type. Also you could look at the rental section of the local paper as a guide.

I just received my copy of Buyer Beware and I can say that it is excellent and is probably exactly what you are after.

Cheers

A great calculator…very handy to use.

Just one question….is it possible to update the Stamp Duty to include all states/territories rather than just Vic as the default? Perhaps a menu to select the state (similar to the “weeks Vacant” menu.

Fantastic resource!

I couldn’t agree more. If it was some Joe Blow who usually finishes 5 minutes after Thorpe and had no chance of qualifying would there be such a fuss? I doubt it.