Forum Replies Created
Hi Lioudmila,
Thanks for your post and I hope you are enjoying the book. Nice to know I was under an Xmas tree [
]Welcome to the community and thanks for posting. I moved your post to the PropertyPlus area as that is a better spot for it.
I’ve read your situation with interest. Once I went to the bank for finance and they said that they would lend me $X provided I had the equivalent in cash in a savings account.
How much interest will you give me on my deposit… 4% How much interest do I pay on my loan…8% Er, why would I have this arrangement?
I think the same holds true for you. You might find that these days you can find a good cash mngt account that offers higher interest as term deposits are becoming a thing of the past as the financial market matures.
Now, the first thing we need to do is differentiate b/w your home and your IP. One is lifestyle the other is investing.
In terms of your IP, by paying cash you have no leverage which makes your CoCR very low. Still, at least you’ll have +ve cashflow as you have no interest. Nevertheless, your money can work harder for you than what is presently the case.
Some suggestions:
*Take a mortgage against your existing property and then place a large slab of your TD as a 100% mortgage interest account. It will be at call and will allow you to expand similar to a LOC without the need for cash security.
*Once you borrow against your IP and use the cash for elsewhere your property will become -vely geared. As such your property will become a growth asset which means you’ll need to consider your investing strategy moving forwartd. Decide on this b4 you buy anything else and also set your benchmark rate of return against which you can evaluate various investments.
You’re in a good position, but the key will be to maximise your returns from hereonin.
Well, that’s my 2c worth.
Have a great day,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi MC,
Stagefright hey… lol [
]Anyway, Simon is right. The cost(s) of selling the property (including legals, agent commission, advertising etc) is all deducted from your ‘profit’ with the balance most likely being taxed as a capital gain.
The only exception is if you are in the business of buying and selling property, in which case there is no CGT as such, it is all taxed as ordinary income. In this case the costs of selling are treated as a normal tax deduction.
In case you are confused, let’s flesh out an example.
Parameters
Property bought for $100,000 (after all costs) and sold 24 months later for $180,000. Sale costs (legals etc.) come to $5,000. Taxpayer is an individual.
Example One – Investor
Sale price: $180,000
Net purchase price: ($100,000)
Profit: $80,000
Reduction in cost base – sale costs: ($5,000)
Adj Profit: $75,000
CG Discount (50%): ($37,500)
Profit to be shown in ITR as Cap Gain: $37,500This will be taxed at the taxpayers appropriate marginal rate
Example Two – Property Trader
Sale price: $180,000
Net purchase price: ($100,000)
Profit: $80,000
Tax deductions – sale costs: ($5,000)
Profit to be shown in ITR as ordinary income: $75,000As to whether a taxpayer is an investor or a trader, there is a substance over form approach and several tests that the ATO applies. In the majority of cases though, unless you are regularly buying and selling property, most investment property taxpayers will not be traders.
Hope this has helped.
Happy New Year!
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
Hi,
Yeah… but you can’t then access the money until you retire. [
]Plus you’ll get taxed on the way out too, so the return on offer is based on the best case scenario and not on all the facts.[
]Alas for the pros and cons on super…
Happy New Year!
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
https://www.propertyinvesting.comSuccess comes from doing things differently
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