Forum Replies Created
There is Depreciation (of fixtures and fittings) and then there is Special Building Write Off (write off of the cost of construction or the building itself). Whether there are claims to be made for either depends on the age of the house. The treatment of both is different as far as what happens on sale of the house.
Depreciation – fixtures and fitting – any written down value of these will comprise part of the sale price at sale for tax purposes. Likewise, any depreciable items included at purchase will come out of your cost base for CGT
Special Building Write Off – any claimed during ownership can potentially reduce your cost base of the property on sale and potentially increase any Cap GainIt is correct that there may be some adjustments on sale due to both of the above, which potentially will increase any capital gain. However, given the purchase dates of early 1990's, any capital gains will most likely receive a 50% discount. So, effectively, at worst for every $1 you claim during the life of the property as a tax deduction, you will then potentially have to add back 50c onto your capital gain when you sell (after the discount) – ie tax brackets being equal you are usually always better off claiming.
I would be asking the accountant to explain in a little more depth so that you can fully understand his rational for not claiming given your particular circumstances. Costs Vs Benefits
Cheers,
CraigHi Tommo,
I work in Gladstone and live at Tannum Sands.
Gladstone, Tannum and Calliope are different property markets but feel most/all of the effects of the growth in Gladstone.
Calliope market initially grew due to locals moving out from Gladstone due to price, but also for more of a country feel and bigger blocks as Gladstone grew. Now Calliope is attracting investors as returns are great and prices are cheaper. Longer term if things dont go to plan, yes I would expect this market to tank. Also returns will pull back once supply of houses in Gladstone catches up which it will eventually, theres plenty of land available in Gladstone.
Tannum is completely different. Most Gladstone residence aspire to live at Tannum as it is only 25km from Gladstone but is on the beach, and its a quality beach too. Property in tannum has always been more expensive then in Gladstone by a fair margin, however with what is happening in Gladstone and the fact that Gladstone is the only place most investors look, prices have closed considerably, even meaning some types of property are now cheaper at Tannum/Boyne Isalnd then Gladstone.
I believe this market will always be strong, families will always want to live near the beach and out of Gladstone which is after all an industrial town. Long term, no matter what happens in Gladstone, Tannum Sands and Boyne Island will be growth areas, purely based on locals wanting to live there.
When all of the construction of these industries is over in 10 years and most of the workers have left, it will be the families that will be left, those who like the lifestyle, not just the big money, and where are they going to want to live?
No sure if someone has covered this …..
Some expenses that can be claimed against a property do not actually effect your cashflow. Things such as depreciation and building write off are tax deductions and can result in your property being 'negatively geared' while cashflow wise, you may not need to be actually dipping into your pocket. Negative geared does not necessarily mean cashflow negative, thats more important.
Agreed, making a loss on a property yearly via it being 'negatively geared' is not a good thing in itself. Many people are just focused on reducing their tax and forget why they are investing in the first place.
Hi,
I'm a Buyers Agent in Gladstone.
Google CQ Major Projects Status Report and it will show you every project in the Central Queensland region, budgets for these projects and where they are all up too. It is updated every quarter I beleive. Needless to say there is an enormous amount of projects going on in the region.
Cheers,
CraigPetria,
Deciding on a structure is very specific to your personal situation and specific to each individual property deal. It is not a one size fits all for everybody, and even may be different for the same person from deal to deal.
When deciding a structure, you have to put together your best guess of what will happen during the life of your project and work out what structure will best suit that situation.
I will say that your idea of holding in your own name and then transferring to the trust after subdivision to sell will be of no benefit to you as discussed earlier.
You really need to be talking to someone about your individual circumstances, what exactly you are expecting to get out of the deal, ie. timeframes, expected profits, family structure as far as who the trust can distribute to etc.
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Cheers,
CraigThe land will also need to be transferring at market value to the trust, so you may be up for some significant cgt on the sale of the land as well as the stamp duty. If you are simply going to transfer the land into the trust and then sell it, there is no benefit in transferring it thru to the trust as it will have just been transferred in at market value anyway, so there will be no gain conceivably in the trust on sale.
Too many people focus on the negative gearing benefits. You are doing this project to make capital gains, so the negative gearing benefits short term in your own names may be meaningless in the bigger picture. Dont forget you dont loose the benefits of the negative gearing in the trust, they are just carried forward and offset against what will hopefully be a sizeable gain in the future.
I hope you are also ontop of the GST implications of the subdivision?
Watch using unit trusts as any cgt discounting benefits may be lost on distribution of the profit out of the trust.
