hi everyone
I hear alot of experts say that there are strategies to save tax. This to my understanding means that you pay less tax.
However this is not my experience i am a paye employee i bought a investment property in the cbd in Adelaide off the plan which was negatively geared about 2yrs ago.
Because of how the income / outgoings are i have a shortfall which is picked up via my tax with a 221d arrangement for cashflow purposes plus a bit of my own input.
So in fact i am not saving tax but redirecting part of my tax obligation to the property.
This is the only way i am aware of in paying less tax in my pay packet. Are there other ways?
I am looking at lease options for residential property if anyone has a good grasp on this type of set up, are there any pitfalls i should be aware of. Is this a standard contract or do you have to get one drawn up by a solicitor. I am in South Australia where wraps are illegal.
kind regards
alf
Alf, I’m no expert on this, but -ve gearing is precisely what the “experts” teach to save u tax. But bear in mind that you are spending $1 to gt 48c back as a rebate.
I think most people on the forum are against this strategy, and Steve would provide good input no doubt. Another way which I’m sure your accountant is doing for you- is by depreciatin. Paper losses that allows u to make a deduction.
One of the hardest things to define, when it comes to negative gearing, is what exactly is negative geraing?
For me, it means a property that costs you money to hold.
My husband has a large tax bill, and we used new properties with big depreciation claims to reduce his tax levels. Overall, we were a few dollars in the black each week, so it wasn’t costing us any money to hold them. With recent growth in Melbourne, we now have lots of equity to use as security for a LOC which I’m using as deposits for wraps.
I have to say that this method worked up to around 3 properties, but eventually you pay no more tax and so can’t use the deductions, so it’s only a partial plan.
Having said that, though, I certainly believe that what we did was a good move at the time we did it, and has made things a bit easier for us now. At the time I don’t think we were ready for anything more!
If there’s one thing I’ve learned with property investing, there’s definitely more than one way to achieve financial independence, you just have to find the way that works best for your own personal circumstances and mindset.Keep smiling
Felicity
I would agree with Felicity and say there are many ways to achieve longer term goals.
Personally I am a conservative investor and like Felicity and husband we were in a financially good position back in 1985 and bought our first investment property. This property was negatively geared in that we were paying 14% interest and returning 11% gross. We may all laugh at this now, but this was my first property, having nobody around me involved in property investing, and unlike today very little press coverage about investing.
Having found owning this first property no hardship, two years later we bought another one, followed by another and another until today we own 43 units, 4 houses, 4 townhouses and a factory unit.
All these have not been bought based on negative gearing, but at times there was some negative gearing involved. They are all in Sydneys western suburbs with a debt to equity ratio of 30%.
Of course as we acquired more, things have become easier, but fundamentaly you still need to look at the deal and it needs to work for you right from the start. If the deal is based on some future event such as rental increases or infastructure developments or any of a meriad of possibilities which does not eventuate then you are stuck with a lemon.
We are currently sitting on the side lines looking at the crazy market waiting for further oppurtunities.
I am smiling from ear to ear
ziz
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