Forum Replies Created
Perhaps as a suggestion you can roughly work through the numbers as they would be if you were say 5 deals further along. Do the sums for your first reno, work out your profit after doing the reno based on selling into a stagnant market, and then work out the cost to sell and the tax you will pay, remembering that you will pay off the mortgage also. Provided you have chosen a suitable property and done a suitable renovation, you would expected to have a net profit.
Then add this profit to the funds you started with and go through the exercise again. And again, and again, and again, simulating your first 5 deals.
Right, now you can go through the entire exercise again with the focus on not selling, but on redrawing the funds, presumably up to 80% of final market value (the selling price you used above). Work out the annual profit for each property by adding up the rent you will be receiving and subtracting all of your annual expenses. You may find that you cannot even do 5 deals without running out of funds, or you may find that you have a feasible plan to work with.
This is something you have to decide for yourself and the outcome depends on your starting position, your renovating experience, the market you intend to specialise in etc…
This doesn’t have to be a complicated thing to work out, I would suggest that you don’t get too hung up on depreciaton etc, unless you’re a calculation whizz, the intention is to work out for yourself which type of strategy suits you.
Personally I’m working on the buy-reno-sell strategy right now because I have low equity at present and am attempting to build up sufficient equity to be able to leave it in a deal like a commercial property returning a healthy annual income.
I hope this helps.
All the best,
[happy3]Hi Pav,
have you tried contacting the NZ Inland Revenue Department? You could start by phoning the non-resident centre at 64 3 467 7020.
[smiling]In reply to gabsman
I purchased and studied “Wealth Guardian” from propertyinvesting.com and “Trust Magic” by Dale Gatherum-Goss
Then I asked one of the authors some questions.
[upsidedown]
For general entertainment value, I can add this – I have asked enough experts to have been professionally advised to have just about all basic structure types! Own name, trusts, company, ….depends on who you’re talking to. (yes, I did pay for each professional’s advice *!?*#)
The latest advice (free of charge this time) is the one I’ve taken. When I have been able to prove myself to be actively investing in Australia, then set up a structure here. Apparently lots of people have great intentions and then after not using their company, corporate trustee, trust, etc but paying fees annually, they then want to get rid of the un-used structure.
I found the confusion about exactly what would suit my personal circumstances was holding up my progress, and now the plan is to assess the appropriate structure at the time of each purchase. Apparently it can all be set up quite quickly. From my reading I think I know the structure that’s right for me now.
[tired]Kiwi-Fulla Are you a NZ resident? Sounds like it because you said “all income stays here” or words to that effect.
If you are NZ resident then it is easy for you to have a NZ company and/or trust. A company or trust in NZ needs to have a NZ resident involved, so for Aussies, that is more difficult. I am an ex kiwi and when discussing the same for myself, I was advised that a company called Guardian Trust could be used as my NZ trust, but I haven’t investigated further .Regarding tax implications. I purchased my NZ properties in 2005 NZ tax year but there were 3 weeks of the Aust 2004 tax year remaining. I asked 2 Australian accountants and the advice was to ignore the difference in tax years, to wait until I had completed the 2005 NZ tax return and to put the “bottom line” into my 2005 Aust tax return. When it came time to do my 2005 Aust tax return I rang the ATO and they said that I must split out all income and expenses separately for each aussie tax year, which I subsequently did. It would have been easier if I had set up my record keeping initially with this in mind, but it wasn’t too big a deal, and at least the ATO will be happy.
In Australia, you will have to pay tax on all income earned regardless of where in the world it was earned. If you pay tax in NZ also (ie. if you make a profit), then that will be considered as a tax credit in your australian tax situation, so you won’t be taxed twice on the same income. But if your NZ property is in your own name and you are paying tax at non-resident rates (19.5%) then there will be tax to pay in Australia if your normal tax rate is higher than that. If you make a tax loss, then that can be carried forward indefinitely to offset against a future profit, and I don’t think you can offset that loss against your aussie income. Also your Aussie accountant has to use your NZ accountant’s depreciation schedule when doing your aussie foreign income assessment.
By the way, any travel to purchase your properties is not claimable and it can’t even be included in the cost base for your australian capital gains calculation when you sell.
I think my comments are correct, I have 3 properties in NZ but only one tax return’s experience and it is difficult to find people who are knowledgeable in both Australian and NZ situations, so I hope I don’t mislead you in any way.
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