Forum Replies Created
Hi Jules1,
It is not a major tax issue.
If you are unable to claim the 6 year absence rule (i.e you are buying a PPOR elsewhere), you need to take a market valuation of your property at the date it ceased being your PPOR. This then becomes your cost base for CGT purposes.
Cheers,
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.auHi Carlin,
The 221D is lodged with the ATO to reduce the amount of PAYG that is deducted from your salary each pay period.
This form is lodged when you have a negative geared investment and/or substantial deductions (i.e. motor vehicle).
The form is effectively an estimate of what your tax return will show at the end of the year.If you do not prepare the 221D and have substantial deductions, you will simply receive a large refund at the end of the tax year (assuming all else being equal!).
Be careful however as there is penalties if you underestimate your income.
Cheers,
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.auHi Terry.S,
GST is only applicable on commercial property. If you are wrapping residential property (that is not newly built), you need not worry about GST.
Cheers,
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.auDepreciaton still needs to be taken into account when selling an investment property.
Ideally, you should list your depreciation schedule in the contract of sale to state that the sale of the chattels will be at the written down value. Otherwise you could have an assessable gain which is not eligible for the capital gains discount.
When this is done, the sale price is effectively reduced by the written down value of the assets and the original cost base is reduced by the cost of the assets.
cheers,
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.auBe careful Leo, initial repairs are not tax deductible and are therefore treated as capital.
To claim a deduction, you would need to rent the property out initially before getting the repair work done.
Cheers,
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.auHi Greg,
A discretionary trust and family trust are the same thing.
Family trust elections were introduced around 1996 by the ATO. They were brought in to reduce the number of tests a family trust had to pass before being allowed to claim its prior year losses.
They are also required when imputation credits over $5,000 are distributed to beneficiaries. This can be particularly relevant where you operate your own company and your trust owns shares in it.
Once a family trust election is made, the trust is restricted by only being allowed to distribute to the nominated individual and their family group. Two generations up and two generations down.
Generally this isn’t a problem as most people only distribute profit to their own family members.
Cheers,
Mark Unwin
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.auHi Ty,
Brotherly love, you are bringing tears to my eyes!
A structure you could use with your brother is a family trust. As you are related, you are both eligible to receive profit distributions without any tax issues arising (i.e. family trust elections as I mentioned before).
You should document your agreement as to how you are investing and your % share.
You could prepare one informally or if you are concerned, a lawyer could draw one up fairly cheaply.
The contract doesn’t need to be certified, just signed by you both.Cheers,
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.auHi Brad,
A company may not be the best option for you. Whilst this is simple for a joint venture and income tax is capped at 30%, you will not benefit from the 50% exemption on any capital gains you make.
A trust could also pose a problem if your trust incurrs losses (family trust election rules meaning future income can only be distributed to one family group).
Options to consider would be a partnership of trusts (you would both need to setup your own family trusts) or a unit trust.
cheers,
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.auIn this circumstance where assets could be at risk, the business should operate via a company and any assets should be owned by another entity (i.e. trust) which would lease them across to your company.
At the end of the day, if you are found to be negligent for workcover, the director can be held personally liable as well as the company.
Cheers,
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.auHi Andrew,
Looks like the study is paying off. You are spot on with your discussion about source & residence.
There are creative ways of trying to avoid this but I do not encourage that.
The NZ rental income is declared on your NZ tax return and also your Australian tax return as foreign income (with a foreign tax credit).
If a capital gain eventuates, that is not declared as income in NZ but is declared on your Australian tax return as a capital gain.Keep up the study and full marks to you!
Cheers,
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.auHi all,
You can still purchase your family home in a discretionary trust and claim interest and deductions provided the rent being paid is at a market rate. My experience has been that this is more trouble than it is worth.
Unfortunately the tax rules disallow you from claiming an individual tax deduction via a unit trust arrangement.Cheers,
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.auHi Mini,
1. Spotters Fee – If you are an investor, this would be added to the cost base of the asset as an ‘incidental cost in acquiring the asset’. The deduction is not allowable as the cost was incurred before the asset derived income.
However, if you were a property ‘trader’, the cost would be tax deductible.2. NZ Seminar / education – This would be deductible if you owned investments either in Australia or NZ. If you were starting out in investing and did not hold any investments in Oz or NZ, you would not be able to claim the deduction.
In order to claim a deduction for tax purposes, the expense must relate to an income activity. This is what the ATO would look at.
Note – the NZ laws may be different in claiming a tax deduction over there for spotters fees and education. Advice should be sort from a NZ accountant.
Cheers,
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.auSparticus10,
Finance seems to be the biggest hurdle as to why you need a NZ Trust. However, as the entity has to lodge a NZ tax return and apply for the relevant file numbers, it is probably easier for your NZ accountant to have a NZ structure (Best to ask them).
Cheers,
Mark Unwin
Williams Partners Pty Ltd
http://www.wp.com.auAn Australian entity is generally no good for purchasing in NZ. You will need a NZ structure and you will need to borrow from a NZ bank. The NZ banks tend not to lend to Aussie entities unless you are buying in your own name.
Be careful of setting up a NZ entity where NZ residents ‘control’ your structure to avoid being taxed in Australia.
Cheers,
Mark Unwin
Hi DiamondCreations,
As a general rule, a trust is the best structure to purchase your investment property. However, this may not always be the case depending on your personal details and your future intentions with investing. It will also depend on whether the property is postive cashflow or negatively geared.
The issue you currently have is that you have signed a contract and you do not have a structure in place (The trust should exist at the time of entering the contract and the contract should have been signed ‘and or nominee’).
If you are just starting out in investing, there is no real harm in buying the first one in your personal names if you are trying to find your feet.
Cheers,
Mark Unwin
