Forum Replies Created
redwing,
Don’t forget the CGT ramifications. If the property is only in your sister’s name and she lives there initially then she can exempt any capital growth from tax. A 50:50 arrangement will expose half the gain to CGT.
Andy,
If you are negatively gearing a property Centrelink will add the loss back so you will be incurring expenses that Centrelink do not recognise. Nevertheless if it is negatively geared the worse they can do is say the property has zero effect on your entitlements. If the property is possitively geared yes you wife will start to lose Centrelink entitlements but just what depends on whose name the property is in and your income levels. At a worse case scenario (assuming you are only going to buy one or two properties) you could lose more than 80% of the possitive income but very unlikely with the right planning.
For example if it is negatively geared use salary sacrificing to show the property as positively geared in your tax return but reduce your other taxable income without reportable fringe benefits because otherwise deductible. This will actually increase your part A entitlement and if the property is in your name only it will not affect your wife’s part A.
or
If you are in a high tax bracket you can use salary sacrificing to effectively transfer some of your income to your wife. She may lose her Part B but you are saving more in tax than the rate at which Centrelink reduce her part B and as Part A is based on combined income you are in the same position as before the rental property because again the amount you salary sacrificed has reduced your taxable income anyway.
There is a salary sacrifice kit on our web site http://www.bantacs.com.au but it does not discuss the Centrelink ramifications. If you e-mail me your income details and children’s ages I will give you a better idea, though it is not easily explained.Franky,
What a commercial property is used for can effect the rate of depreciation:
Some buildings qualify to be depreciated at 4% instead of 2.5%. Commercial buildings constructed after 26th February, 1992 will qualify for the 4% depreciation rate if they are “used mainly for Industrial activities or amenities or offices for workers and supervisors involved in industrial activities.” Otherwise only 2.5% applies. Industrial activities are:
1) The manufacturing of items or storage of manufactured items.
2) Processing of primary products
3) Printing, lithographing and engraving.
4) Preparation of foodstuffs in a factory or brewery.
5) Activities associated with the above such as packaging and cleaning.
For other Commercial buildings started before 26th February, 1992 and after 16th September, 1987 the
depreciation rate is 2.5%. On Commercial buildings started before 16th September 1987 and after 21st August, 1984 depreciation of 4% is allowed. Prior to 21st August, 1984 only 2.5% depreciation is permitted. No depreciation is permitted on Commercial buildings constructed before 22nd August, 1979.
Buildings constructed after 26th February, 1992 can be depreciated at 4% if they are used as a motel, hotel, guesthouse or short term traveller accommodation providing there is at least 10 bedrooms or apartments.Melbear,
Available for rent is a bear minimum if there has been any private use of the property but in Jack’s case its investment related all the way.
Steele’s case went so far as allowing interest on vacant land that was one day intended to be income producing.itsamoorey,
I’m a CPA but not in Northern Queensland my closest office to you is Maroochydore. We do great things over the internet. Send me your e-mail address and I will send you our free Rental Property Booklet. Just put Rental Property Booklet in the subject. Or you can down load it off our web page http://www.bantacs.com.au
Jack,
As long as your original intention was to rent the property and that is what you do ie don’t change your mind and move into it yourself. Then the interest from the date of purchase is tax deductible (Steeles Case)
If you send me your e-mail address I will send you a free booklet on rental properties it has a section on the difference between repairs and improvements. Building depreciation may also apply if the improvements are structual.
Please put rental property booklet in your subjectScheldon,
Repairs made once the tenant has moved in but that had became necessary while you were living there are fully deductible IT2587.
The stove if freestanding is plant and equipment so has to be depreciated over its effective life. Accordingly, it won’t make much difference when you buy it.
Improvements as opposed to repairs will not be deductible though they may qualify for building depreciation. I suggest you down load the rental property booklet off http://www.bantacs.com.au for full details of the difference between repairs and improvementsJulia
Faber,
Very interested in this idea that you can set a valuation when changing from a rental to a private residence. Could you quote me a ruling or section number?Julia
petrus,
Why are you changing the title deed? You may be able to use salary sacrificing to arrange the best tax position with no stamp duty costs and lots of flexability. Have a look at the Salary Sacrifice Rental property kit on http://www.bantacs.com.au.Julia
Crackles,
Section 118-145 6 year rule. If you move out of your main residence you can continue to give it your exemption for CGT but you can only use the exemption on one property. The section does not specify how long you have to live there. Couples are only entitled to one residence between them. Section 118-150 allows you to exempt vacant land from CGT for up to 4 years before you live on it providing you live there for 3 months before you sell. In TD51 the ATO lists the factors it considers relevant as to whether you have set up your home there:
Elect & phone in your name
Electoral Roll
Personal Effects
Family
Mail
Length of time
Reason for occupying.Amanda,
Any gain you make on the sale of the rental proeprty will be apportioned on a time basis. A valuation will only work if the home is going from being your own to being a rental not the other way. There are a few tricks available such as using section 118-140 to exempt the rental property as your main residence for up to 6 months before you actually move into it. There is also section 110-25 which reduces the gain by the interest, rates, insurance and repairs incurred while you were living there. This is done before the apportionment so it effectively reduces the capital gain while you were not living there. You need a big box and keep all your receipts. If you want more detail send me your e-mail address & I will send you my free CGT booklet.
Cornel,
The document’s name is 2004 PAYG Income Tax Withholding Variation (ITWW) Application
To get it from the ATO you need to quote
NAT5422-3.2003Julia
Nazza,
The otherwise deductible rule in subsection 52 makes the benefit exempt so your employer is not subject to FBT at all. Subsection 138(3) also exempts your spouses share of any joint expenses as also otherwise deductible to you.Julia
MJ4,
You should seek professional advice looking at your whole situation and future plans before you transfer anything you already own to the trust. Your post implies that you intend to buy more properties. Why not just buy the positively geared ones in the name of the trust so the losses can be used up. Even as I write this I realise there may be many reasons why this is not the best strategy. You really need someone to look into your overall plans.Julia
Better to know the colour of the flag before you start out. How long would you intend to hold an investent property. Considering transaction costs I assume many years. Do you feel that lucky.
Julia
georgisj Posted – 07/02/2004 : 14:39:10
Any way to claim back GST on new residential property?James
No, if you are going to use it as a domestic rental property.
Julia
Inna,
I will leave the equity arguement to Melanie. I just want you to consider if you are going to tie up $150,000 in an investment that has no income return you should at least endeavour to exempt the capital growth from tax if there is enough trust there.
Julia
Orion,
There is a ruling form on the ATO Web site. The area you need to apply for the ruling on is the acceptabilty of the arrangement you discuss in point 3)
FOr example being allowed to negative gear the loan for the Units when you are unlikely to earn significant income from them because the Hybrid trust will re direct it.The ruling wll be binding on the ATO unless the law changes.
Julia
Sorry All,
Having trouble with out new web page. I don’t understand and they only tell me simplistic stories but apparently the site had to become our web master for our e-mail addresses and Melb IT stuffed up.
Anyway we are getting our e-mails now.Julia
Yack
Yes you can salary sacrifice the interest. Both your’s and your wife’s share if the property is in joint names.
Julia
