Forum Replies Created
Hi Justin,
You mentioned you have a home loan. If your home loan has an offset account linked to it, i would advise to put the whole lot into that offset account (as opposed to putting it into a term deposit).
The tax benefits are two-fold:1. The interest income you earn (or save from paying on the linked home loan) is equal to the home loan rate……say its 9%. The beauty is that the 9% return on investment is tax free. There is no taxpayable on the interest you "save" on your home loan.
Suppose you put the $120k in a term deposit earning say 8% p.a. That would equate to income of $9,600 before tax per annum. Not sure what your taxable income is like but I'm gonna assume you have a marginal tax rate of 30% (Taxable income in the range of $34 to $80k income p.a). At 30% marginal rate, the tax payable on the $9,600 earnt will be $2,880 leaving with an AFTER tax return of just $6,720 ($9600 – $2880)
Now if you leave it in an offset account (and assuming your mortgage rate is 9%), the $120k will earn you $10,800 over 12 months (or technically paying $10,800 less interest in your home loan). Whatsmore, the $10,800 is not subject to income tax so the return AFTER tax is also $10,800.
Because the offset account is like a personal bank account, you can redraw it out anytime you like (for other purchases such as a deposit for an IP later down the track).
You will also not impact your eligibility to the Family tax benefits because you did not earn any "taxable" income from the $120k if u put it in the offset account.
So if you don't currently have an offset linked to your home loan, I would seriously consider refinancing to another product that does have an offset facility. The rate might be alittle higher than your current loan but having an offset account is an excellent wealth generation tool that earns you high, predictable AND tax free return on investment.
This is another example of why the loan product with the lowest rate may not necessarily the best loan for the borrowers circumstances.
Hope the above was of help to you.
Cheers
Kevin
Hi TD,
I agree with mpertile. The bond money you received should be refunded back to the tenant or used to pay for damages. Its not income that needs to be included in your tax return.
Regards
Kevin
Blaze,
You cannot claim deduction on $6k stamp duty and solicitor fees (it will reduce your capital gain instead). You could claim 50% of other expenses but will also have to declare rent income received.
You have to weigh up whether it is worth renting out one room (and getting relatively small tax refund each year) versus capital gains tax upson sale of your property. You will lose 50% of PPOR CGT exemption if you rent out 50% of your PPOR.
Regards,
Hi Mini,
If you lived in the property as soon as possible after purchasing it, you have established the property as PPOR (and hence can use the 6 year absence rule to rent out it for up to 6 years and can sell it CGT free).
Paper work involved would be just to have a lease agreement between yourself and the tenant. If the property was built post 1985, it is worth considering getting a Quantity Surveyor to prepare a depreciation report to calculate how much depreciation you can claim each year (Approx $400-500)
Only catch is that you must not OWN another PPOR while you rent out your property (by renting a cheaper place yourselves is fine).
One final tip is to change your repayment stream to Interest only. Its all about prioritising your capacity to repay loan principal and maxmising your tax deduction. You're better off paying Int only and using excess cash each month to pay off your HECS debt or any other non-tax deductible loans you have.
Hope this helps.
Magic32,
Not sure if you are getting a report for a strata title apartment/unit, but if you are, one thing to specifically ask the QS to do is calculate the depreciation and capital allowance in common areas of the block (you are entitled for a share of the common area
depreciation).Regards
Kevin
