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Darryl, thanks for making the effort to reply!
I have edited my initial post for clarity.
My mum is looking for advice on a similar situation.
Is anyone able to recommend a financial adviser I/she can speak with?
Thanks Kane. I've suggested she have a look into accessing some of her super now.
Yes, I think she's best keeping the house. It seems like a great opportunity to rent it out while living with her aunt for a few years. It could save her from endless renting and moving.
From the Age today
http://www.theage.com.au/money/investing/you-need-to-show-true-grit-20110326-1cas0.html
4. Ride the tax breaksThere are tax deductions for depreciation, capital allowance, running costs and let's not forget the 50 per cent concession on capital gains tax for personal investors who have owned the property for a minimum of 12 months. There is no shortage of places to go for information on these. But negative gearing is often assumed rather than relished. It's not all it used to be, when marginal rates were sky high, but it ain't bad, either.
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How it would workScott is looking at buying an apartment as an investment. The price is $450,000 and he will borrow $360,000 (80 per cent). He hopes to live on the rent income at some point. Immediately, however, he knows that if he negatively gears the investment it will reduce his overall tax.
Income: $70,000 (salary) + $20,800 (rent)
= $90,800
Scott's accountant estimates there will be annual depreciation of $5000. He anticipates the interest component of his loan repayment will be $25,884 over 12 months. Here is Scott's ''back of the envelope'' tally of deductions:
Depreciation $5000
Loan interest $25,884
Insurance $550
Rates and levies $6000
Agent's commission on rent $1602
Total deductions and allowances $39,036
Income – deductions: $90,800 – $39,036
= $51,764Scott's taxable income is now lower than his salary. He will pay $9226 in tax rather than the $15,600 he would have paid on his salary alone.
if mum can do something like that, it might help out. I hope she can change the unit from a PPOR to an IP. Does anyone have experience doing that?
She has had international students in before but found it too much work (they required meals as part of board and mum tends to stretch the hospitality too far to make it worthwhile financially). She has had a bad run with sharing so is looking forward to living with her aunt, they have a long close relationship and I think it will be good for both of them to have the company.
Yes, I didn't think about assets for the pension. I'll look into that. Thanks for the heads up.
Yes, i think she should hold onto the place in case she doesn't like sharing. Or if she doesn't like the new town she will be moving to in order to live with her aunt.
Great idea about drawing on super early to get the principal down. I will recommend she look into that. I imagine living on a pension would be tough, especially if you have to pay rent. That's why I want her to hold onto the house, if she pays it off before retiring, her life will be so much easier.
The other option is to sell the property now, and buy a cheaper one in north Tasmania (sell current house $250k and buy new house for $150k). But Kingston/Hobart are better growth areas so I think she should hold for a while, test the waters up north before making any big decisions.
I'm only guessing really, which is why I'm seeking some advice.
Thanks for the discussion so far.
