Forum Replies Created
- Benjamin Csikos wrote:Hey Wyeth,
Sounds like you're off to a good start with your deposit. You might also be interested to know that if you have any super sitting there, you can use it as a deposit to invest in property, and avoid paying capital gains tax.
Also, if you're looking for a cashflow positive house, I have contacts that can get you one through creating dual occupancy house and land packages in brisbane.
Drop me a line if you want to know more.
WHAT THE
You sound like a real estate worker or connected service, then I look at your utube link and your.. um arrr… hmm?
Ben.
Thanks – they just get us everywhere dont they… tax, tax, tax even tax on tax.
Okay, this topic continues to intrigue me.. just cant work out the best thing for me to do. Thanks for bearing with me.
When I signed the contract for the 'off the plan' purchase the developers were offering a rather healthy reward for referring other purchasers to the project. Many of my friends also purchased therefore the $80k is a referral reward.
The developer is unlikely to meet the sunset date and as such I will have the opportunity to re-sign. Therefore I am trying to figure the best way for me to structure the new contract.
I guess an accountant will be able to help me determine whether in my situation the 80K is an income that needs to be declared (be it paid in cash or show as the deposit on the contract).
After our conversations I learn that CGT and SD is payable on market price thus the $138k whether the contract price is this or not.. so thats that question answered.
My preference has always been to put the $80k or whatever is left of it after tax into my PPOR thus the IP can stand alone as IO and with repayments deductable. To do this I sign and pay for land @ $138k. Take my 80k payment in cash and put into my offset to PPOR. (only problem after tax my $80k is now $49,600 boo hoo)
If the 80k is not considered income it seems best for me to take this amount from the asking price and do the contract as suggested $138,000 with the 80k as deposit (+ the actual 10% deposit I paid). Problem, the 80k is now in the IP not on the PPOR thus there is interest that I cant claim (its in the wrong spot!)
I was thinking that when I refinanced the land to build a house that I could take the 80k back out then and put it on my PPOR offsett but I think now I realise that I cant do this.
Any thoughts or ideas?
I dont want to be or appear dodgy, like I dont want to pay my dues/taxes (but well I don't ,who does!) If there is a way within the law that enables me to use my money to better effect I am desperate to learn.
Thanks for clearing that up for me.. I need to make some changes!
Intrigue wrote:On a similar chain of thought.I am learning that it is a good idea to work hard over the years to pay down my non-deductable debt on my PPOR and pay only interest on my IP.
My question is that if after I have paid off my PPOR (wouldn't that be a great day). What if I decide I would like a new home, a new PPOR. It is unlikely that I would want to sell thus I would keep as an IP but I am wondering am I able to somehow get my money back out of that home to put into a PPOR and thus be able to claim the tax benefits on the home that is now IP?
Your a good many Terry, When you say that you "cant get money back out of PPOR without reborrowing" do you mean that I could refinance my PPOR. I.e. I want a new loan on this house as it is to be an investment property take 80% of the value out and use it to purchase a new PPOR.. Is this an equity loan?
I understand you are saying offsett is better and I am heading this way I just want to get an understanding of all the options pro's and cons. My heart tells me to pay off the PPOR asap, nice security. My head is saying this may not a smart decision although it likes the security too.. dont want to get too far down the road and realise I have trapped myself.
cmason wrote:Intrigue wrote:Stupid question. If I have 10,000 sitting in an offsett account for a loan of $300,000 @ 6.54.How much interest am I saving as a result of having this 10k sit there? Is it as simple as 6.54% of $10k equals my savings each month?
My understanding would be that your monthly savings would be 1/12 of 6.54% of 10K
Thanks Cmason. I thought of that error just after pressing post. should have said per year not per month. Not much really is it, $10k saves me $54.50 per month (better than nothing I guess)
Stupid question. If I have 10,000 sitting in an offsett account for a loan of $300,000 @ 6.54.
How much interest am I saving as a result of having this 10k sit there? Is it as simple as 6.54% of $10k equals my savings each month?
On a similar chain of thought.
I am learning that it is a good idea to work hard over the years to pay down my non-deductable debt on my PPOR and pay only interest on my IP.
My question is that if after I have paid off my PPOR (wouldn't that be a great day). What if I decide I would like a new home, a new PPOR. It is unlikely that I would want to sell thus I would keep as an IP but I am wondering am I able to somehow get my money back out of that home to put into a PPOR and thus be able to claim the tax benefits on the home that is now IP?
An offer presented in contract form is always considered more seriously.
It is a bit of a long shot but your buyer may have an appointed power of attorney that would 'with his permission' may be able to sign and complete the contract terms?
Owe okay thanks Terry,
So perhaps the contract shows the value @ $138,000 and the deposit of $80k. Upon settlement I pay the balance.
I pay stamp duty on the total value. This maintains my value and aids future CGT issues.Do I still need to declare this $80k as income – as I am not being paid it. Would I have to decalare it as a CGT event?
Sorry for all the questions, tax is a new area for me and our local tax people do not seem very clued in.
Thanks Terry,
Would your advice to me be pay the $138,000 for land and then declare the 80k income pay my .38c in the dollar and just cop it sweet? If I do this as I had planned (unless any one has any better ideas) I was going to set up the land loan seperate to my PPOR and pay the $80K into my PPOR… does this sound like an okay plan?
Why do I keep hearing about how accountants set up financials for clients so that they pay next to no tax by declaring expenditure etc on investment property? Is this for people in a much higher earning bracket than me?
Why are they selling?
How long has it been on the market?
Are their any comparable homes for sale nearby?
What could or does the home rent for?Thanks Terry, I'm getting there.
Thanks Matt, naturally I would seek professional advice before entering into such an agreement. I live in a relatively small town and finding people (even solicitors or accountants) that know about this sort of stuff is albeit impossible. Thus I seek to learn in anyway I can.
Just one more question.. sorry.
The strike price is what the person will pay. In the above situations the buyer will pay $520k in the first example and $500k in the second. WHO sets the values? Who is the one to determine whether the property has gone up or down and by how much?
Thank you Terry, most helpful. I was aware than many used to do Put/Call to avoid stampduty. As you say I think now they have to pay stamp duty anyway so not real point in doing these? I also heard that the new contract much reflect the same price as the first, thus any profits or cost coverings have to be a seperate deal (very confusing and alittle messy for a new purchaser not to mention gives the appearance of being a bit shady)
I had thought because of the changes they had gone to the 'and or nominee' to avoid taking ownership and thus paying stampduty but you say this will not work for them either.
I am guessing they would also need to pay CGT? or is this avoided as they dont actually take ownership of the title?
As neither of these strategies now work for people wanting to secure a property of the plan and on sell pre settlement. Why are they still used? Why is it that investors stil talk about these as if they are a good way to avoid stamp duty and or tax?
Option – Why would a seller give someone and option – surely you would do a conditional contract?
Call Option – If the property goes over $521,000 he must sell to the buyer however if the property falls the buyer can walk away and leave his $1,000 behind for the seller? again not so sure why this is a good deal for the seller.
Put Option – How is the buyer locked in when all he stands to loose is the $1,000. He doesnt have to buy?
Thank you for taking the time to help me understand this. I am guessing there are other onlooker with the same sort of question.
Oh my this thread has me confused. I have in the past heard of people signing up to 'off the plan' purchases with Put/Call options which seem to be called Call and Put within the above correspondence? I have also heard of people signing with "and or nominee". I dont really know what these are or what is the difference between them? I understand that people use these when they intend on on-selling the property prior to completion/settlement. Is this the same as all the option talk above?
Is there someone out there that could put into plain english for me what the below names relate to and their differences-
Call Option –
Call and Put –
Put Only –
Option –
And or Nominee –When you buy an option from a vendor for the say $1.00 stated, does on sign a contract or rather an intent to purchase type document?
Thanks number 8, how do we go off-line as such.. Do I email you from your website?
Forgot to mention – I have spelled out a five year plan of investment but have not yet grown my knowledge enough to determine how or even if this is achievable- advice on how I might achieve such goals would be welcomed and or how I might create a financial plan etc.
Okay I am back, Thank you Duckster, Andy Kirby and Crusty for your comments. I also appreciate the compliments as I thought perhaps I was going mad seeing something that others didnt seem to be considering.
Duckster – I do know a little of LOC's. I even had my PPOR under an LOC at one stage, for reason which have now changed it was a disaster. Based on your formula (thank you) I could borrow at least $41k. As the land purchase in only $138k this would more than suffice as a deposit for a secondary loan (yes I can service both loans). At what level does mortgage insurance come in? I think I have to pay a 20% deposit to avoid MI? I think I am seeing what you are saying however as I am currently saving and plan to have a 10% deposit saved in cash ($13.8k) by the time settlement comes around I am wondering how the MI savings compare to the cost of re-financing my loan into a LOC…. thoughts?
I think you are also saying that I can claim purchase costs and interest paid via loan on this allotment in my tax return, even though it will be land only? what about rates?
The land is likely to be reconsidered later this year as it seems the developers will not mean their sunset dates, thus I will need to reconsider the purchase and choose to re sign or not. Currently the land is in my name as is the PPOR. Does this inpact your suggestions? Should the land stay in my name or be changed to include my spouse? (I am currently the main income earner and I hold the equity however over the next few years I plan to have a child and this may mean a balancing or change in the primary income earner).
Andy Kirby – thank you for your contribution, you ask good questions. I guess my basic answer is the same as most peoples, sooner rather than later would be good however I am yet to have children and I think if I were to push too hard too quickly I would put the family under great stress. My focus is doing this sensibly when I have the resources rather than extending myself and risking my home and family. Within 5 years I would like to have my PPOR loan down to a level that the repayments equal what I would achieve in income if the property was rented. I would like to have built a duplex on the land mentioned and have them rented out in a cash positive or close to cash positive arrangement. The third property that I would like to fit into this equation is a bit confusing my brain tells me it should be a cash positive basic home, but my heart and my desires are to secure a 20acre property for our future PPOR (secure now in a resonable location before prices get too far out of our reach).. thoughts?
Structure, I find this area rather confusing and have much to learn. My primary goal is to ensure that no matter what my PPOR is safe. While I hear it is not a good tax idea to pay out ones PPOR. My guts tell me this is a must do ASAP. I am happy to play the game a little and I understand there is risk for reward however i do not wish to gamble with my PPOR. I would like to set myself up so that the PPOR remains seperate and thus I would use equity from the investment properties and not PPOR.. thoughts?
Crusty – Thank you this makes sense (I think), I understand what you are saying with inflation although I hadnt looked at it that way. I think I understand what you mean with tax (you can claim the interest on loan payments thus the higher the interest paid on loan the better the claim?) I am thinking though that this is really only beneficial if you are a high income earner and thus in the high tax bracket? I am also wondering is this tax saving equals the risk. I need to find a way to put this into numbers! I would rather pay more tax than risk my PPOR
What do you mean by this …. At the same time you have 2 houses gaining value which is equity(money) you have gained which you dont have to pay tax on if you access it with a LOC but again inflation and the taxman can help to pay for this increase in wealth. Why does it matter if it is a LOC or other loan set up?
Again thank you all for taking the time to help me.. I eagerly await your replies.
Thank you very much for your comments. I will spend sometime obsorbing this information and no-doubt be back with some questions.
