[elkamMember@elkamJoin Date: 2006Post Count: 722]

July 31, 2007 - 12:17 pm

Hello Nucopia

The capital gain you make on a property is just added to the rest of your taxable income for that year and taxed at your top marginal tax rate. If you have had the property for more than 12 months you get a 50% discount on the gain.

Naturally if you have no other income for the year that you sell the property the tax will be lower.

If the property is held in a trust then the advantage is that you can apportion the capital gain between beneficiaries to try to minimise the tax by giving more to the lower income earner(s). 

There are other things that you can do to minimise CGT such as contributing extra to your super fund so the best thing is to talk to your accountant before you sell an IP.

Cheers
Elka 

[elkamMember@elkamJoin Date: 2006Post Count: 722]

July 31, 2007 - 11:42 am

Bez wrote:

Do I put as much money as I can spare into paying this one off or do I start saving for the next one ?…

Hello Bez

Assuming you have no non tax deductible debt which you should pay off first what I would do would be to have an offset account against this loan and put everything I earn into it. This gives you the best of both worlds.
 
Cheers
Elka

[elkamMember@elkamJoin Date: 2006Post Count: 722]

July 31, 2007 - 11:23 am

Hello Nucopia

There is no CGT on your PPOR. It's not a question of deferring it. It is just not applicable.

The post above refers to investment properties on which unfortunately you do have to pay CGT on selling…. assuming you made a gain.

Cheers
Elka

[elkamMember@elkamJoin Date: 2006Post Count: 722]

July 31, 2007 - 12:27 am

Hello Misty1

Use the search function to search for hutch then click on his name on the top of any of his posts. You will get a drop down list. Click on view public profile and then on contact and you will be able to email him.

There may be a quicker way but this is the only way I know.

Hope this helps
Elka 

[elkamMember@elkamJoin Date: 2006Post Count: 722]

July 26, 2007 - 5:59 pm

Good to know. Thank you for that. 

Sorry Simon. You were right

Cheers
Elka

[elkamMember@elkamJoin Date: 2006Post Count: 722]

July 22, 2007 - 4:31 pm

Sorry Simon. Are you sure that the 6 year rule can be applied if you rented the property out before you moved into it as your PPOR. I didn't think so … but could be wrong. 

Definitely worth checking with your accountant first Jez.

Also, if that is the case and you are not planning to buy another PPOR in the 4-5 years you spoke of, then it would be a great loss not to be able to use the 6 year rule. In this case I would definitely offer the tenants some incentive to move before I settled. It's only 3 months.

Cheers
Elka

[elkamMember@elkamJoin Date: 2006Post Count: 722]

July 19, 2007 - 11:07 pm

I don't know the law about when you are obliged to have a body corporate. I do know that when I bought a unit (1 of 2) 5 years ago there was no body corporate and each owner had their own building insurance.

When I was organising strata insurance for my unit one of the questions I needed to answer was…..  is the other unit insured and with whom. I was a bit concerned about the separate insurance policies and worried about the insurance cover for the common area as I was not sure what type of insurance policy the owner of the other unit had.  I was trying to persuade the other owner to go halves in one strata insurance policy covering both units when I learned that they were also wanting to sell so I bought that one too. Insurance problem solved  

Seriously though, if there is no body corporate and the other owner has no mortgage then there is nothing (except good sense) that compels them to have insurance… is there?
 I can imagine that in those circumstances I may have had problems getting my first unit insured.

Elka

[elkamMember@elkamJoin Date: 2006Post Count: 722]

July 19, 2007 - 8:25 am

Hello Chilliaa

In Vict. the SRO uses the council valuation of unimproved capital value as the bases for land tax. I would assume it would be the same in other states?

Cheers
Elka 

[elkamMember@elkamJoin Date: 2006Post Count: 722]

July 17, 2007 - 12:34 pm

Hello Tom

I believe the cost for mine will be somewhere in the order of $500- $600. Part of it needs to be done by a plumber and then the water people come and do the final connection.

However the cost will depend on how the pipes run and whether any new ones will need to be laid.

I suggest you ring the authority supplying water in your area and ask them about the process. They will need to send you out some forms for your plumber. Also get at least 2 quotes from plumbers for the job.

In my case it's a question of only 2 units on the block and I own both of them. The whole property is currently on one meter and the water usage just gets apportioned 50/50 to each unit. However, as it's an estimate and not an actual reading, I am obliged to pay all water usage for both properties.I am actually getting the meter split into 3. One for each unit and one for the common garden area. I will still need to pay the usage for the common garden area but not for the 2 units. I have been advised that the 3rd meter will only attract a $15 meter charge as well as a usage charge but no other service charges (sewage etc.etc) as there is no toilet involved.

I am with Melbourne water.

Hope this helps
Elka

 

[elkamMember@elkamJoin Date: 2006Post Count: 722]

July 17, 2007 - 10:50 am

Hello

In Victoria, if units are metered separately then the tenant pays the water usage too. I am just having the meter split on a property I owe with 2 units on it. This one time cost will save me years of paying water usage for both tenants.

Cheers
Elka

[elkamMember@elkamJoin Date: 2006Post Count: 722]

July 12, 2007 - 1:19 am

Hello blueheeler

I think you mean interest on 40% of the loan. 

But what have you given away? I don't know these loans but assume that they want 20% of your capital gain in return. Imagine how much you would have to give away if you had bought a property pre boom and sold post boom or kept it for a long time so that you must have had a capital growth in that time period. 

Real life example.

I bought a property in 1992 for $255K   
20% is $51K  so interest saved on this part using 9% for the 15years is -/+ $42K and another $42K saved because of the 20% in an offset account, as per your suggestion. 
Total interest saved $84K.
Note: I don't know the real average interest rate for the period but think 9% should cover it?

Current value of property $920K so doing it very roughly CG is $665. 
20% of this is $133K. So I saved $84K to give away $133K.

Good business for the bank I think. 

Elka

[elkamMember@elkamJoin Date: 2006Post Count: 722]

July 11, 2007 - 2:26 pm

Hello Richard

My question was full of assumptions which I neglected to verbalise. 

You explanation is crystal clear but what structure would you use which wouldn't trap the loses ( I assume the property would be negatively geared on 100% lend) within the entity, besides a HDT. 

Don't answer if you'd rather not but is the HDT you use one developed specially for you or is available for purchase from one of the solicitors specialising in investment structures. 

The ruling I meant is in the link below. I'm a total lay person in this area but when I read this I thought is spelt the end of this usage for HDTs.

http://www.ato.gov.au/rba/content.asp?doc=/rba/content/65710.htm 

Hello Moosehead

I forgot to answer your last question.
A property has to be income producing for you to be able to claim the interest on the loan. Vacant land is not usually income producing.

Cheers

Elka 

[elkamMember@elkamJoin Date: 2006Post Count: 722]

July 11, 2007 - 10:50 am

Hello Moosehead

Whether interest on a loan is tax deductible or not depends on what you did with the money you borrowed. If you bought yourself a nice boat, it's not tax deductible. If you bought yourself a house to live in (PPOR) it's not tax deductible.
It does not matter which asset you used to secure the loan.

In the 4 steps you outlined above, the asset you used to secure the loan may become an IP but that's irrelevant in this case. You used the money for private purposes. i.e. to buy a PPOR. so no tax deduction for the interest on that money.

However, if there is still an original loan on the property then the interest on that part is tax deductible.

For example you have a $300K loan on your PPOR. You borrow an additional $100K against the property to buy yourself another PPOR and turn the original one into an IP. 

Interest on the $300K is tax deductible.
Interest on the $100K is not tax deductible.

Actually Richard is the expert in the area of loan structuring so I hope he will correct me if I explain it badly. I can do it best with an example.

You buy a PPOR and take out an IO loan with a 100% offset facility.
You put all your money into the offset account to save interest.
If you ever decide to turn this property into an IP and buy yourself another PPOR then you simply use whatever money you need from the offset account to finance the new place. You also link this offset account to the new loan (for your PPOR).
The money in the offset account is now working to reduce the non deductible interest on you PPOR.
The interest on the loan for what has now become an IP increases as it's no longer being offset but this interest is all tax deductible.

Hope this helps.

Elka

[elkamMember@elkamJoin Date: 2006Post Count: 722]

July 11, 2007 - 9:51 am

Hello Richard

Previously I thought the method you suggested worked by setting up a HDT and then borrowing money to buy units from the trust. The money the trust recieves from the sale of the units is then used to buy the property. Because the borrowed money was used for an investment (to buy the units) then the interest on this was tax deductible. However, I thought the recent ATO ruling knocked that on the head?. Am I wrong? If I'm wrong can you tell me how it is still possible please. 

Thank you
Elka

[elkamMember@elkamJoin Date: 2006Post Count: 722]

July 10, 2007 - 9:53 am

The agent you bought through is no longer being helpful? How strange.
 
Maybe contacting another couple of agents who deal in that area will get you more information, specially about rent and demand. This is also a good way to sort out who you will get to manage the IP for you …. assuming you are not going to do it yourself.

A big difference between commercial and residential IPs is that it usually takes much longer to get a tenant with a com. IP. so doing it yourself may end up being a false economy unless the demand is high. Also the lease needs to be drawn up by your solicitor as it's much more complicated than a res. lease.

Yes, I also have 3 residentual IPs. This is my only commercial one but sometime next year I hope to be in a position to look for another.

Cheers
Elka

  

[elkamMember@elkamJoin Date: 2006Post Count: 722]

July 9, 2007 - 2:02 pm

The yield is different for the different commercial property classes. Mine is classed as industrial and I get about 7% yield which is normal for this category.

Here is a link to a site were, from memory, the different yields for the different classes are given.

http://his-best.biz/ 

There is also lots of information about commercial property on the site so it's worth a brows.

Also this site from Michael Yardney is worth a read

http://www.propertyupdate.com.au/articles/49/1/Residential-Or-Commercial—Which-is-right-for-you%3F

Your property looks like it's a small showroom office unit. Have you looked at the area and seen what activity is going on there? When you have the agent on the line then ask him about the demand in the area for these style of units and whether he has any on the books and for how long.  

Also search on this site for units similar to your in the area to see re rental/size etc.

http://www.commercialrealestate.com.au/

Hope this helps
Elka  

[elkamMember@elkamJoin Date: 2006Post Count: 722]

July 9, 2007 - 11:20 am

Hello Wayne

As I recently posted elsewhere on the forum I have a commercial property (wharehouse/office) which is being managed for me by a PM. I pay 10% letting fee and 4% management fees. This is in Melbourne.

Cheers
Elka

[elkamMember@elkamJoin Date: 2006Post Count: 722]

July 8, 2007 - 12:54 pm

Thank you for passing that information on. Glad you got it settled at last.

Cheers
Elka

[elkamMember@elkamJoin Date: 2006Post Count: 722]

July 8, 2007 - 12:46 pm

Hello Daniel

I think the reason you have not received any answers is that this is not something that any of us may have come across as it is a somewhat unusual arrangement. As a person totally unqualified in this area I think I see a problems with it.

How will the income from the IP be split?. If you don't receive any income from the unit you will not be entitled to claim any expenses, including depreciation. If you do receive income from the unit, how are you going to use it to service the loan (and be able to claim the interest) since your name is not on the loan.

Maybe a good accountant can suggest a better arrangement and answer your questions.

Sorry, no answers just more questions.

Elka 
  
 
 

[elkamMember@elkamJoin Date: 2006Post Count: 722]

July 8, 2007 - 10:57 am

Hello Xenia

You just betrayed your age …. in a good way.

It may politically incorrect but it's a perfectly valid, if somewhat out of date, English word.

OOOps. I think I just betrayed my age …. in a bad way.

Hello GCG

I second the suggestion to give Richard a call. If he can't find a way to help you finance what you want to buy then he should be able to help you in the rent to buy area as I believe this is his investing vehicle.

Cheers
Elka