Forum Replies Created
Martin,
Even though it is added back to increase your capital gain by the same amount, your capital gain can be reduced by the 50% discount. So, you get the full effect of the tax deduction at your marginal tax rate when you claim the depreciation, but upon capital gain, you only pay tax at 1/2 your marginal tax rate. Plus, the cashflow benefit of claiming now and paying later.
Hope that helps
Ross
Hi,
You can get your employer to pay for the costs of relocating as part of your salary package. It is a tax deduction to them, and is also an exempt fringe benefit. So you can get an indirect benefit of the tax deduction.
Fortunately, no you don't.
Residential rental income is input taxed and so you don't need to register for GST at any stage, and GST can't be claimed or paid on residential rent or related expenses.
Hope this helps.
Ross
It does seem expensive, but when it comes down to it they can charge whatever they like, but whether or not you return next year it's up to you. Many larger firms won't spell it out in black and white, but they are not interested in smaller clients and so charge as much as they can get away with, and if the client leaves then they are not too fussed. They got a good return on the work performed. There is a general shortage of accountants, in proportion to available work, and so they naturally become selective, I suppose it is their right to choose how they want to present and market their services.
In general I would say that is on the high side, usually between $600-$1500, but it depends on a few things. Most accountants charge on an hourly rate so if you know how much their hourly rate is then you can see how long they are saying it took.
Did they do your individual tax returns as well (how many), what type of record keeping did you provide. Did they ask many queries of you. Did they give you any advice about maintaining tax records or reducing your tax in future. Were you happy with the service. Building & selling a property is more complex than a standard rental. Do they also act as the ASIC agent, and did they charge for this separately. Did they also prepare minutes for the trust and company.
These are some of the issues that will determine the cost to you.
Hope that helps.
Ross
ROI = Return on Investment, expressed as a percentage.
For example, if you invest $100,000 and it earns $8,000 per annum, then the ROI is 8%.
Now, there will be differences in whether or not you are using just the amount that you invest, or the cost of the overall investment, ie; if you borrow, then your investment is less than the cost of the investment. Also, whether or not you are using cash return, pre-tax return or after-tax return. The combination of figures will give signficantly different answers. So be sure that you are consistent in what you're using to measure and compare investment returns.
Hope this helps.
Ross
Sure can, get a QS report done and you're right to go
Hi Carol Anne,
A new trust is unlikely to protect your current assets from any legal action, but probably a smart idea for any future investments. This is not to be taken as legal advice but my limited opinion. You should really get a legal opinion for some certainty.
regards
Ross
Mark, You need to be able to make a reasonable valuation, so either getting the actual selling prices of similar properties in the area sold at around that time as evidence, or a quantity surveyor may be able to help with the valuation. They are qualified to make an informed valuation. Also, as Elkam has alluded to, you may be able to use the 6 year absence PPOR exemption which will make the CGT nil, but remember that you can only have this exemption on one property at a time, so it is usually best to choose the property with the highest capital gain, or potential capital gain.
Ross
Is the ACT house your PPOR? If so then you would be looking at CGT on the Ipswich property being;
selling price net of selling costs, less the market value of the property when it started producing income. Less 50% CGT discount. This amount, if a net capital gain, is added to your taxable income. If a loss, is offset against other capital gains or carried forward.I would be suspect that the Real Estate agent valuation is not correct, otherwise the property value hasn't risen in 3 years? and it is not a valuation that you could rely upon anyway. You would need to get a qualified valuer/quantity surveyor to value the property when it started producing income to rely upon the value. Or at least get some other evidence of a reasonable valuation for the property at that time.
Hi Greg,
Glad to try and shed some light on your situation. As you've said, if the property was developed/sub divided then you would probably be regarded as in the business of property development. Thus you would be required to register for GST, assuming you exceed the $75,000 turnover threshold. As you would be registered for GST, you would be able to claim GST on any expenditure related to the development, and you would be required to include GST on any sales, possibly using the margin scheme, where basically you pay GST on the margin between the sale and purchase prices.
The renovated house is an area of contention/grey area. If the house is regarded as a passive investment then there would be no GST, either claimable or payable, as GST is not applicable on input taxed supplies, which passive investments are. If however, the renovated house was regarded as part of your property development business operations then the GST situation would be as per any property development as mentioned above.
The house and land package is identical to the renovated house, with regards to GST.
The supermarket business is able to claim GST on expenditure because some of the items are regarded as GST Free, a technical difference to input taxed supplies, and the supermarket is carrying on a business.
So, the main thing to consider is whether or not you are in the business of property development or a passive real estate investor. You don't actually get to choose this, it is decided by the facts of your activities and whether the ATO would consider you in business or not. Julia Hartman (Bantacs) has a great fact sheet on how to not be a property developer, if you'd like some more info.
Hope this helps.
Ross
Is the trust actually carrying on a business? Or merely investing in real estate? In which case the GST on expenditure is related to input taxed supplies and so it cannot be claimed back. If the trust is carrying on a business of developing property then there probably will be GST on the sale of the property, or at least the margin. Be very careful about what your activities are, because if you are claiming to be in business then, apart from the GST issues, you won't be eligible for the 50% capital gains tax concession, which is only applicable to passive assets.
Hope this helps.
Ross
Hi Bundy,
Why is your trust registered for GST if it is just a passive investor, ie; rental investment? Passive investors aren't required to register for GST, unless the rent is commercial and your annual rent is at least $75,000, not including GST. Not being registered is usually better because you won't have to pay 10% of your income to the government.
Regards
Ross
Hi cqblove,
Another important thing to consider before buying anything is the structure that you use to own your investments. This will be a vital part of your plan, to not only reduce your tax but more importantly to protect your investments. With the expected tax cuts, again, the tax benefit of negative gearing is continually being eroded, although you will still be in the highest tax bracket, although that is currently 46.5%, and possible down to 40% within 5 years?
Please consult with your accountant before signing the purchase contract to make sure that your structure is suitable and effective. Trusts, both discretionary and hybrid, along with bucket companies, will more than likely be suitable for your situation.
Even though this is a property forum, I would also suggest that you consider a share portfolio as part of your overall investment portfolio.
Good luck.
Ross
Some really good points there Terry.
The unit trust arrangement will definitely be the most tax effective and flexible. As has been noted the main thing that needs to be sorted, is the decision making and dispute resolution process, which is likely with such a large group, and a tie breaker needs to be decided upon with an even number of equal votes.
Are all members wanting an equal say, or do some just want to contribute equity?
A written plan is a must.
Good luck!
The RBA or ABS would be a good place to start, although median house prices don't really tell you much, in a similar way to the stockmarket in general (ASX 200 or All Ords), unless you are buying an index fund, but you can't do that with property. What matters is the property or share that you buy and it's growth, because as with all investments, a positive for one is negative for another.
A company or corporation (same thing) means that it has been incorporated or brought into legal being by statute. A company is a seperate legal entity.
First things first…why are you holding business & investment assets in the same trust? Potentially exposing your investments to business risk and compromising the asset protection advantages of the trust?
Secondly, you can offset the trading loss against the capital gain.
Yes, it's a very tricky and unfair situation, but that's the ATO. Although I haven't personally seen them put this into practice you need to be aware of the fact.
Even though your hubby will get the better tax breaks now, he will also be taxed on the capital gain (although only 50%) at his tax rate.
Consider doing a cashflow projection over the term of the investment (5 yrs?) on 3 scenarios.
1. Hubby owns 100%
2. You own 100%
3. You both own 50%This will give you an idea on the difference between the ownership tax effects.
Also, if you hubby's work allows salary packaging, and you own the property jointly, he can package all the rental expenses at his higher tax rate and split the income with you at your lower tax rate.
Finally, find an accountant who is willing to take the time to explain and educate you the different options and their consequences, not only tax consequences. What about asset protection? Is your hubby in a litigation risky occupation?
And, as Richard said, also consider a trust structure, which can provide the ideal tax benefits and also asset protection.
ross
