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To be honest, they are taking the mickey with those extra fees.
E.g. these days postage is actually worse service than email (less convenient, if you're paperless you have to scan it manually) and the want a fee for worse service?
And on Colin's point about paying somebody to collect money for you: some agents don't even use direct debti (e.g. they take the money from the tenant's account), they rely on direct deposit (i.e. the tenant has to click pay each month, it's not even automated).
I recently met a guy in property management who charges 8.8% fees including GST and all fees, and the paperwork is on an online portal. But he's rare in providing that level of service. And he's not in SA, so I can't pass on this name.
On the other side, most agents I've come across quote 8% but forget to say that it's GST exclusive, and that there are other costs on top of that, the biggest being a "letting fee of 1-2 weeks rent.
Incidentally, quoting a price GST-exclusive is illegal and considered an unfair trade practice by the ACCC.
Back to your point: when picking an agent I'd rather the guy who tells you the total price up front .
I had a disagreement with a colleage this week about property management. I said I think 1 in 10 of our landlord clients are happy with their real estate agent. He thinks it's zero out of 10.
A good website on this would be SMSF Academy. An ex-boss of mine Aaron Dunn runs it. (I have no finanical ties to him, but his content and blog are very good.)
To answer a small part of your question, yes it would be complicated! There are not just tax rules but super rules to consider. You need to do things scrictly by the book and at arms length.
Hi Ashley,
If you use H&R Block as a typical example, they quoted a colleague of mine $225 for employee + 1 rental tax return.
Our price is about the same, and we add $75-$90 for each additional property. Any more than three and we'd talk to you about rental management software to make it easier.
The first year should be more because you should be putting together a CGT asset register (record of the cost base) and a schedule of deductible borrowing costs. It's much better than trying to do it when you sell. That would be $150.
Then there is the PAYG withholding varation. There are more work for the first year of owning each additional property, and that is a separate service to the tax return.
From your previous technical comments I take it that you're in tax or legal?
By the way, thumbs up to Scott's comment. Spot on mate. Shoeboxes are expensive things.
walt_k wrote:On this topic, would someone be good enough to clarrify amount of CGT payable on a PPOR? I am still trying to understand the extents of the term "CGT Exemption". Does the full exemption mean only 50% of the bought to sold price is taxed? Or does the full exemption mean 100% CGT free?Reason why I ask; my partner and I are currently building our first home, which we intend to live in for 12months. At that point, if we sell, will we need to pay any CGT on what gain is made on the sale? Would appreciate some input here as this will determine whether we sell straight up, or lease out.
It means 100% CGT free.
There are a whole host of variations to this. There has to be a house on it to claim the exemption – you can sell a vacant block CGT free in most cases. The exemption can be extended to vacant land (as in your case) assuming you built within 4 years and moved in. You can only have one main residence at any point in time. It is not fully exempt if part of the home has "income producing purposes" like a home based business or you rented out a room to a boarder.
But sticking to a plain vanilla situation – no CGT on your main residence.
Btw, the 50% discount you mentioned applies to all non-main residence properties held over 12 months.
G'day beefz,
Nice to read about a 26yo who has their financial house in order. People our age (I'm 29) have this rep for being money wasters, but it's a generalisation.
I see you're on an info-gathering mission, so I hope the following info is relevant and helpful.
If you are planning to do the FHOG and move out strategy (which is a common one) there are capital gains tax advantages. You can rent your former main residence for up to 6 years and still call it your main residence for CGT purposes.
That means there is no capital gains tax when you sell, so your take home profit (after tax profit) is up to 23% higher than if you had to pay tax.
The catch is that.if you move out and buy another main residence you can't claim the main residence exemption on both.
The ATO is a great resource, and they have a page on this question: http://www.ato.gov.au/content/36887.htm
Also, check out our site and download the free fact sheet for property investors (in case you choose the investment property option). It's written in plain English (I hope).http://www.beyondaccountancy.com.au/?p=345
Hope that helps.
Hi Jade,
Your friend is right. Once you use the loan for non-rental purposes (non income producing purposes) it is no longer 100% deductible. That's assuming the redraw was to cover private, non investment expenses.
But you don't lose your deduciton completely.
Have a look at my article http://www.beyondaccountancy.com.au/?p=414 or the ATO version at http://www.ato.gov.au/content/00113233.htm (second example).
On the other hand, if your re-draw was for rental property related purposes then it is deductible. For example, you can redraw to pay for renovations or other property expenses without losing 100% tax deductibility on the interest.
Google "split loan calculator property" or "LOC calculator" and you'll find free excel sheets that work out the deductible amount for you.
Jarrod
Terryw wrote:naughtyj wrote:Thanks. Kind of figured as much, but it never hurts to ask.Subsequent question: I'm figuring that property prices won't move upward much in the next 12 months much, and I will be getting a current 2011 valuation on the property in a few weeks.
Would that establish the basis for its "cost" value when I move out and use the difference between that and the final price as the CGT? Or would I simply use "sale price less original purchase place" x percentage of time it was rented?
You would need a valuation to be done, (s118.192 ITAA 1997)
I agree with Terry that the valuation needs to be done.
But there is an exeption to this rule. If you sold your old home within 6 years of renting it out it is still CGT free depening on how you elect to use your exemption. See ato.gov.au and search for 36910 where this is discussed in detail.
But this would mean your new home could not be 100% CGT exempt. And based on your market outlook and for the sake of simplicity with your joint home the valuation method looks like a winner.
I just wanted to point out that the main residence exemption often gives scope for choice, in case that helps.
I hope the reconciliation works out well!
Hi,
We recently saw a client from Chan & Naylor and he had been set up with the same complex range of tax structures (hybrid trusts etc). Given what the ATO say about Hybrid Trusts it is a bit of a risky strategy. Go to the ATO website and search 00242180 in the search box to see what I mean.
Complicated tax structures are expensive make good accounting fees, but they don't necessarily add value to smaller investors. That's not to say that they are charging fees for nothing, or that C&N are a bad deal, but the complex structure criticisms in this forum match my experience.
