Forum Replies Created
I do not want you to follow this information without a second opinion from the ATO, so I have included the relevant web sites that confirm my knowledge on tax law in this area.
-Would we have to pay CGT on the profit (I assume yes).
Yes and may be no.
Is it a primary place of residence – Are you living in it while doing the renovations and what was the purpose of buying the property, where you buying it for the purpose of making a profit see later web links for more information on purpose?If Yes to you purchased it for the purpose of being your main residence you may get CGT tax exemption after a certain time period of living in the house.
Is it going to be owned for 12 months – 50% cgt tax discount could apply. see http://www.ato.gov.au/businesses/content.asp?doc=/content/18427.htm
If owned 50/50 CGT will be 50/50. This means that 50% of the taxable capital gain is added to each joint owners other tax assessable income to work out what tax bracket rate each of you will be paying for the capital gain. You need to look at the tax rate scales to work this out.see http://www.ato.gov.au/individuals/content.asp?doc=/content/12333.htm
Can we claim all the costs for reno's (40K) as a tax deduction?
As you spent 40k on renovations you add this to the cost base for a Capital Gain reduction – must have receipts your labour is not billable or claimable. see http://www.ato.gov.au/individuals/content.asp?doc=/content/36919.htmAnother issue is whether there will be GST on the renovations if you sell. If you do substantial renovations GST is involved . The question is knowing what a substantial renovation is? Could involve being registered for GST.
see http://law.ato.gov.au/atolaw/view.htm?docid=GST/GSTR20033/NAT/ATO/00001 section 54 to section 140OR
If we keep the house after the 40k of renos and rent it out could we still claim all the reno's (40k) as a tax deduction.
You would be able to claim depreciation on the fittings and fixtures if rented or add it to the cost base but you can not claim both ways as this is referred to as double dipping and the ATO doesn't allow two different forms of deductions on the same item.
Working out a depreciation schedule for effective life of items can be difficult so I am suggesting you use a quantity surveyor if you go down this direction.
We are not sure what the best way to go??
You need to know what investment method you are planning on using.(1) You are a trader and you renovate for quick profit and then do it again
(if done too often you can be classified as a trader and not get CGT exemption as PPOR. see http://www.ato.gov.au/corporate/content.asp?doc=/content/57402.htm&page=2&H2 )(2) You are a buy, hold and never sell type of investor and have a long term plan.
suggest you look at the following
http://www.ato.gov.au/corporate/content.asp?doc=/content/57402.htm&pc=001/001/038/002/002&mnu=&mfp=&st=&cy=1
http://www.ato.gov.au/corporate/content.asp?doc=/content/00208572.htm&pc=001/001/038/001
http://www.ato.gov.au/individuals/content.asp?doc=/content/00191831.htm&pc=001/001/038/002/014
http://www.ato.gov.au/corporate/pathway.asp?pc=001/001/038I have not heard of a specific loan product called Guarantor Loan
however a simple search of google has come up with the information and it seems to exist
.
http://www.homeloanexperts.com.au/no-deposit-home-loans/guarantor-loans/
http://www.guarantorhomeloan.com.au/
http://www.guarantorhomeloan.com.au/what-is-a-guarantor-loan/
http://www.ownyourfirsthome.com.au/Fast-track-your-loan-and-save-thousands-use-a-guarantor
http://www.mortgagechoice.com.au/downloads/File/Tips%20And%20Checklists/Guarantor.pdf
http://www.smartsearchfinance.com.au/St_George/family_pledge.htmlproblems / drawbacks / cons
http://www.aussielegal.com.au/forum/forum_posts~TID~6525.htm
http://loansense.com.au/blog/homeloan/home-loan-guarantor/
http://www.jetlending.com.au/no_deposit_guarantor.htm
http://www.guarantorhomeloan.com.au/protecting-the-guarantor/
http://www.guarantorhomeloan.com.au/removing-the-guarantee/
http://ezinearticles.com/?Should-You-Sign-As-a-Loan-Guarantor?&id=2150197
http://www.mannering.com/lawsite/guarantee1.htm
Ive been told that a Guarantor Loan would be suitable for us, as my partners parents are very willing to help us and go guarantor for repayment or deposit or both…whatever it takes!
Ethically you should show the drawback links above to your in laws so they know the risks involved to them.Your Parents may be required to go to a solicitor and have the mortgage documents and risks explained to them and then the solicitor stamps and signs the mortgage documents. This is usually required by banks to protect them legally from your parents coming back later and stating they were unaware of the risks involved.
How this loan works is that the lender's loan is secured by your guarantor, so if you do not make the payments then your guarantor becomes legally responsible for your loan and your payments. So if they can't make the payments the bank will sell their assets to pay of your loan.
Another method that you might want to investigate is a bad credit loan. (do a google search)
You get your in-laws to borrow as a line of credit against their home asset for 30% to 40% of your home loan amount you require.
They give you 30% to 40% for your deposit and you then apply for a 60% to 70% LVR bad credit loan.
As your credit rating improves you refinance down the track to a Low doc loan.
This way your in-laws only lose 30% to 40% of your home loan if you default.Or you can keep paying the line of credit home loan off for them even if your investment house is repossessed. So the risk to your in-laws is less.
http://www.badcreditfinance.com.au/
http://www.globalise.com.au/customer-profiles/bad-credit-loans-personal-loan.shtml
http://www.nonconformingloans.com.au/I cannot advise you on which way to go but I am giving you the information for you to decide what method you wish to implement.
Ruth,
This web site look like a great resource.
I think car parks are more of a buy and hold for cashflow generating method of investment.
I have been thinking of buying them as I can't borrow more than $70,000 from the bank due to low cash flow.Another method is to get a special option on the property if you have time on your side.
Called First right to refuse.
So you get first option to buy if they sell it in the future.
So if it was an elderly person and they passed away you would have first option to buy it from the benificiariesHeard of a deposit bond !
Dangerous part – you have to pay off the deposit bond on the expiry date
http://www.anz.com/personal/insurance/deposit-bond/
http://www.lawyersconveyancing.com.au/deposit_bond.asp
http://www.depositpower.com.au/dpg/
http://www.xinc.net.au/home_loans/deposit_bonds.htmlI read somewhere that un-developed land near a development zoned neighbourhood is being charged a development charge to pay for the infrastructure required for development. Even though the property may be a farm or large acre.
This was happening in Victoria not sure what other states are doing.SELL one and buy another one in another state with a threshold for land tax. .
Prince Nottingham is well and alive in Australia.
GST was suppose to replace all other taxes . Hmmmm
Enquire at a bank on how much you can borrow – You do not have to apply for a loan just tell them you are thinking of getting a loan and would like an idea how much you can borrow before you go out and buy a house.
I always do this before I go out to buy.finnings first national
http://www.finning.com.au/index.cfm?pageCall=content&ContentID=32761&MenuItemID=33033&subject=Contact_UsClose to Narrewarren …. I use them they are always on the ball !
http://www.allianz.com.au/allianz/Landlord+Insurance.html
http://www.cgu.com.au/cgu/cgu/linkAuthContent.do?contentId=/OurProducts/PersonalInsurance/LandlordsInsuranceI have a view point that paying $500,000 plus for a house limits who you can rent out the property to.
I own property worth under $300,000 in Cranbourne and it is affordable rent for the rental market.
The other point is would you rather have all you money in two properties or spread over 3 or four properties. It is putting all your eggs in one or two baskets which is a higher risk.
I live in Forest Hill and I see a lot of empty rental properties.
Also
If you try to rent out a new property between November and Late January you will have difficulty finding tenants it is just the way the rental market seems to operate.
Check out this one it has a 30 day free trial cost $250
see http://www.tucows.com/preview/386866I'm using http://www.robertjnixon.com/ but they cost me $770 last time I used them.
$0 to $34,000 tax non resident 29%
it is almost the same as residents except you have no tax free threshold and no offsets and no medicare.
see
http://www.ato.gov.au/individuals/content.asp?doc=/content/33969.htmIf the shares dividends are fully franked you have paid 30% tax already so no more tax unless you reach 80,000 in income and then tax would be 10% more.
if the dividends were not franked you may have already had 48.5% tax withheld from the dividend.Property income of $9600 is that rental income as you get taxed on Net income.
So your net property income = rental income – (total expenses)
so you may find your net property income is smaller or negative.Capital gains tax would be the capital gain added to your taxable income but a 50% discount may apply
In your situation you could email the tax office and ask them.
http://www.ato.gov.au/individuals/content.asp?doc=/content/4892.htmSome previous postings on this situation
https://www.propertyinvesting.com/forums/getting-technical/legal-accounting/4329617?highlight=boarder
https://www.propertyinvesting.com/forums/property-investing/general-property/4329344?highlight=boarder
https://www.propertyinvesting.com/forums/getting-technical/legal-accounting/4328447?highlight=boarder
https://www.propertyinvesting.com/forums/property-investing/help-needed/4327840?highlight=boarder
https://www.propertyinvesting.com/forums/property-investing/general-property/4323598?highlight=boarderTerryw wrote:You don't pay tax on borrowed money. But what you are saying you will do is really just shifting the loan from property B to A. Tax deductibility depends on the purpose of the borrowing and what the funds are used for. You are borrowing to pay down personal debt.Once you move into IP the purpose changes of the extra loan.
So the extra interest on the increase won't be deductible.
Buy the cheaper one and work like buggery to pay it off then you can rent it out and you have extra cashflow
Extra cashflow – more borrowing powerbuy another cheap one -and work like buggery to pay it off then you can rent it out and you have extra cashflow
Problem with $700,000 is all your money goes to interest and you can never pay it off.
A cheaper property can be paid off quicker or paid down to build up equity.Problem with waiting for capital gain in cheaper property is
that the $700,000 house also achieves capital gain
and then you may have to pay cgt on cheaper property if IP.http://propertydevelopmentsource.com/2bfree/2008/03/02/property-development-spreadsheets-anyone/
Has a spreadsheet with the big 6 report for $4.95
Haven't tried buying it just what they stated — http://propertydevelopmentsource.com/thebig6.html
You may find an appropriate spreadsheet at
http://www.somersoft.com/forums/showthread.php?t=26452http://www.spreadsheet123.com/ExcelTemplates/fixup-houses.xls – doesn't have GST but looked good.
That's is why 97% or more of the population stay poor.
They use their mind to produce a poor life
where as the 3% think how can I do this
even if the bank won't lend them the money ,
they think how can I still invest in property
or what else can I invest in that is a smaller baby step
or who can I invest with.A person has to make a Quantum Leap to be at their full potential
I went to a free seminar which was an introduction to the full blown seminar in March in Brisbane 2010
see
http://www.fortuneevents.com/quantum-leap-your-life.htmlIf they are giving specific financial advice that will make you decide on what to invest in then they must be a licensed financial adviser.
However the information on what an offset account does is considered to be exempt from this.They also leave themselves liable to being sued for a financial loss by their clients if the advice leads to their client suffering a financial loss unless they claim that the advice is not specific to the clients circumstances and that they should consult a licensed financial professional before making investment decisions.
You do not need a dummy postal address as you can proportion your house
so that part of your house is PPOR and Part of your House is IP.
So your expenses incurred to earn the income are also proportioned in the same ratio.
However you will lose a proportion of your house from exemption of capital gains tax.
see
http://www.ato.gov.au/download.asp?file=/content/downloads/IND00191817n17290609.pdf
See example 6 page 7 in document or page 11 of 44 in PDF.
Renting out part of a residential property example 6claiming 100% of expenses would be most likely seen by the ATO as fraud or tax evasion via a dummy address when 100% of your house is not being used for investment
jail or a fine or both could be the result if audited by the ATO. Is it worth being honest or risking your freedom?
Also rent has to be at a market price and renters have to be at arms length also in PDF if you search it.
