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

November 17, 2008 - 1:50 pm

Hello folino54

In the next few years ( until 2012?? ) at your age you are able to make a tax deductible contribution of up to $100K each to super. This means that you can wipe out most/all of any CGT you would need to pay on the sale of any of these IP's.
Putting these funds into super (maybe SMSF ?) will earn you income which attracts a very nice tax break…currently 10% tax and after retirement 0% tax. 

Just something to consider.

I agree with Terry. You need professional advise from an accountant specialising in this area.

Hope this helps
Elka 

 

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

October 22, 2008 - 12:05 pm

Hello Joseph12

Yes you can but there will be CGT ramifications when you sell. You have to work out whether it's worth it in the long run.

http://www.ato.gov.au/individuals/content.asp?doc=/content/36910.htm&pc=001/002/026/017/005&mnu=5060&mfp=001&st=&cy=1

Hope this helps
Elka

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

October 22, 2008 - 11:45 am

Hello kjun01

In your position, specially if you qualify for the FHOG ( which is a nice 14K this year) , I would buy a property which I would first live in and then rent out after 6/12 months (depending on the state you live in). So even though you will be living in it initially buy it with the criteria you would use to buy an investment property. Also set up the loan structure as you would for an investment property ( i.e. probably IO with 100% offset).

If you can find a property which could use an upgrade you could do this and add value to it while you are living in it.

After the 6/12 months you could go back to renting and this ex PPOR would remain CGT free for up to 6 years.

Cheers
Elka

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

October 18, 2008 - 3:55 pm

Hello DraconisV

My understanding is that if you first rent out your place and then make it your PPOR, when you rent it out again you will not be able to use the 6 year rule re CGT. 

Please check this with a good accountant but if I'm right it would be better for you to live in the unit for the first 6 months ( 12 months in some states ? ) and then rent it out.

Cheers
Elka

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

October 17, 2008 - 12:39 pm

Hello Richard

You must have a crystal ball somewhere.

I don't know which thread it was on but I remember reading that you predicted that the banks will do away with the rates discount for larger loans on the pro packages.

Just got advised that ANZ will not be offering the 0.7% discount for new lo doc loans with the pro package.

I guess that's just the beginning as less competition  means less incentives needed? 

Cheers
Elka

 

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

October 13, 2008 - 11:03 am

Hello dublin_101

In your calculations I think you may have forgotten to use the 50% discount to CGT because you've held the property for longer than 12 months. 

Cheers
Elka

      

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

October 10, 2008 - 9:47 am

I wondered whether the situation had changed in the OZ tax world.

Many  years ago I accepted a 2 year contract to work overseas and while I thought I would come back after that time more contracts followed , life happened and I haven't been an Oz resident  since.  When I left Australia I organised my affairs so that I would be a non resident for the ATO for pretty much the same reasons as jc1979 probably should. Being away for at least 2 years make that easier I thought. 

I think there is no law against finding out that you'd rather live in Australia after all and coming back.  

Thank you for the answer eddiec.

Elka

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

October 9, 2008 - 12:53 pm

Hello eddiec

I tried to find the sections you mentioned on the ATO site but got totally lost.
Because of this I don't know if the situation changes for jc1979 if he is deemed to be a non resident for tax purposes.

Does he still have to declare the income he earns in his country of residence (UK)  to offset against his Australian losses?

Just out of interest.
Elka

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

October 4, 2008 - 12:24 am

I take my hat off to you kev008.
Working 2 jobs and renovating while living in the place with 2 very young children shows motivation and drive.

I don't know what suburb you're in but a $10 pw difference between an old unit and a renovated one with a gardener included seems too small a difference to me. You may like to get a couple of agents in for a chat to get their opinion on what you should be able to rent it out for. They will probably be on the high side but it will give you a better idea. Also check out realestate.com for your suburb.

Agents in Melbourne generally charge around 2.75 – 3 % of annual rental as leasing fee plus costs of advertising and around 6.5 – 7% of annual rental as management fee. This is all up including inspections.
If you do this yourself and also most of the repairs you should be able to save yourself around $2000 per year. 

You may like to read this in the half hour you have free

http://www.consumer.vic.gov.au/CA256F2B00224F55/page/Publications-Renting-Renting+a+Home%3a+A+guide+for+Tenants+and+Landlords?OpenDocument&1=80-Publications~&2=910-Renting~&3=0-Renting+a+Home%3a+A+guide+for+Tenants+and+Landlords~

Cheers
Elka

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

October 3, 2008 - 2:27 pm

Hello jpn251177

As Terry said, this is a complex area because it is not only dependent on Australian tax law but also on the tax law of the country you will be living in and whether the two countries have a double tax agreement. Being England I would be very surprised if there wasn't such an agreement. 

However, Terrys' answer as to what your obligations in Australia are is correct.
You will need to submit an Australian tax return each year reporting your rental income and expenses. The loss you will be making can be carried forward to be offset against future profits but I am not sure for how long. Your accountant should be able to answer this or simply ring the ATO and ask.

I'm an expat living in Europe but my properties make a small net profit. I am currently negating this by contributing to a super scheme. Something for you to consider when your property turns CF+

I have to report this rental income on my tax return here but don't need to pay tax on it because Belgium has a double tax agreement with Australia. The only thing they take their cut of is interest and share dividends. The latter is very painful for fully franked dividends.

If you're into shares it may be of interest to you to know that you don't need to pay CGT in Australia on CGs on shares. Whether England will tax you on this is something to check in England.

I assume you know that you can rent out your PPOR for up to 6 years without damaging it's CGT free status but if you intend to stay in England for longer than don't forget to have the unit valued just before the 6 years expire.

I hope this is of some help.

Elka 

 

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

October 3, 2008 - 11:06 am

I don't know how old your unit is and in what condition but since it's about to become your 1st IP you need to start seeing it as such.

Do you know what you can rent it out for?
Is there anything that you can do to it that is not expensive that will increase the rent?
Unless it's very old it may be worth your while to get a depreciation schedule done as this is a non out of pocket tax deduction.

Are you planning to use an agent or rent it out yourself?
Agents take a letting fee and commission on the rent but if you are going to be doing it yourself you need to study up on all the laws relating to rentals. 

Cheers
Elka

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

October 3, 2008 - 10:45 am

Hello kev008

Understand your frustration but sometimes the best but hardest thing to do is wait.
As far as buying your first IP, in my opinion, this is just such a time.
 
In the mean time keep saving and researching. I notice from one of your other posts that you are in Melbourne. There is a networking group you may wish to join who meet ones a month.

https://www.propertyinvesting.com/forums/property-investing/general-property/4325982?highlight=meetings 

After reading what I assume was your first post I think you are on the right track. In fact you are about to have your first IP…….. with the added advantage that until you buy your new PPOR it will stay CGT free for up to 6 years

https://www.propertyinvesting.com/forums/community/opinionated/4325956

You may like to change the loan on your unit to IO with 100% offset account. This will have the same effect as paying down the loan but leave you with the option of using the savings in the offset account to buy your new PPOR while maximising the tax deductible interest on your current unit should you decide to keep it as an IP. 

Hope this helps
Elka

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

August 31, 2008 - 10:49 am

Hello ankitjain
 

You can of cause leave Australia intending to return one day ( 2 – 5 years? ) . If you never come back to live, well… life is full of surprises.

 

http://law.ato.gov.au/atolaw/view.htm?docid=ITR/IT2650/NAT/ATO/00001

 

One question you will want to ask an accountant is can you be a non resident for tax purposes but still retain a PPOR in Australia if your intention is to return.

If so, would this absolve you of any CGT liability on your home if you sell it within 6 years.

 

The second paragraph under the heading “Capital gains and going overseas”  on the page of the  ATO site I posted above relates mostly to shares and I think collectibles. If you don’t hold any of these then this is not really of interest to you.

 

GCT ( if applicable) is only payable on a property after it’s sold…. not when you leave.

A valuation is usually done by a valuer  who you can employ.

 

Regarding your calculations.

  

I think one of the difference between your calculations and mine is that you have catered for only $2500 for expenses related to both properties. This is for rates, water, insurance, repairs, vacancies and agents fees. This is much too little.  

 

The other difference if one of perspective. You view the non tax deductible interest on your home ( $27,000) as a “loss” in Australia whereas I see it as a cost of buying property in India which needs to be justified/compared to the cost of this money in India.

 

Cheers

Elka

 

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

August 30, 2008 - 4:39 pm

More reading for you. 

http://www.ato.gov.au/taxprofessionals/content.asp?doc=/Content/64045.htm 

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

August 30, 2008 - 4:25 pm

Hello lennyboy

What a waste of an evening.
I have to confess that several years ago this could have happened to me too until I realised something that may help your wife in the future.

If you get a pushy person on the line who won't take repeated no s for an answer, forget being polite / empathising / not wanting to hurt their feelings ….. as they have forfeited these consideration by their behaviour and just ………

HANG UP. 

Hope this helps for next time
Elka
 

 

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

August 30, 2008 - 12:46 pm

Hello ankitjain

Your current tax agent is not adequate for your needs. You need to go to an international accountant for advice before you do anything else. Someone like KPMG  or maybe someone who you know also has offices in India. Leaving Australia with no intention of returning can trigger a CG event which would be a pity as you will then miss out on up to 6 years of CGT free growth on your home and may also need to pay CGT before you leave. You need advice.

Here is a general description of what/why double tax agreements

http://en.wikipedia.org/wiki/Tax_treaty 

However each agreement can be different so you need advice on the specific agreement between Australia and India.

It's a great pity that your home had been paid off and that the current mortgage is to be used to buy property in India. I very much doubt that the interest on this loan is tax deductible in Australia but maybe in India? This will depend on the tax laws in India and I guess what you use the funds for. Something to ask the accountant. Also I don't know the interest rates in India and whether you will be in a position to borrow money there but are you sure lending against your home is the cheapest source of finance for India?

My calculations for your income and expenses here in Australia is a little different to yours.

Income      2 x rental properties ($340/wk each)                     $35,360

Expenses   Interest on one mortgage (9% of $300K)               $27,000

                  Repairs/agent fees/insurance/rates/vacancies        $ 7,072
                  etc etc. is usually around 20% of the rent 

So assuming these 2 properties are your only Australian income your taxable income should be about $1290 meaning you will pay about $390 tax. 

However, don't forget you will also need to pay the $27,000 interest on the loan on your home.  

A quick google bought up the following site about home loans in India. Maybe you can have a play to see what you could borrow and at what interest rates there.

http://homeloansindia.net/ 

I am not an accountant. Just an expat who went through the same questions once upon a time.

Hope this is of some help.
Elka  

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

August 26, 2008 - 9:47 am

Have you got a picture of the front you wouldn't mind posting?
I confess I don't know what a 1930's chamferboard cottage looks like.

Cheers
Elka

 

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

August 25, 2008 - 10:59 am

Hello Pirate

What you describe is not "wrong". It just doesn't give you the most interest savings.

In fact if you know that you are not financially disiplined (i.e. if you know that the only way you will not overspend on lifestyle each month is if you first allocate that portion) then your method is better for you.

There is nothing wrong with the balance in the offset account fluctuating each month as long as the general trend is upwards.

In case you missed it here is a link to a post by Qlds007 which explains some of the other benefits of an offset account.

https://www.propertyinvesting.com/forums/getting-technical/finance/4325393?#comment-177325

Cheers
Elka

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

August 25, 2008 - 10:25 am

Hello Reno Queen

What a difference a floor makes.         
Looks great.

Did you stain the floor boards in the verandah ?

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

August 24, 2008 - 1:24 pm

Hello Pirate

While it's a nice exercise to see what the minimum amount is that needs to be deposited into an offset account to be able to pay out the loan after 30 years, I assume that you realise that this is not the best use of an offset account.

The beauty with an offset account is that while it can save you masses of interest it doesn't actually effect the loan it's coupled to. The idea is to deposit all of your income into the offset account as each dollar that is there for even one day saves you that days interest. You can then use this account to pay for both personal and business expenses. Some people use their credit card during the interest free period so as to be able to leave the cash in the offset account for as long as possible. Obviously the CC needs to be fully paid off each month as it becomes due. This method is for the financially disciplined only but will save a lot of interest.

You probably know all of this already but just in case ………

Cheers
Elka