Hi Steve and everyone,
I have been having a hard think about the 11 second solution, and looking for properties outside my normal realm, and I did find some! One example is asking price $198K, current rental $390 per week.
Now if you purchase a property that is positively geared (as opposed to negative geared, but with positive cash flow after tax benefits) surely that must be done in the name of the lowest income earner? Isn’t that rent now going to be classed as taxable income? This could effectively halve the cash flow? Am I correct? Is there any way around this?
Similarly, if the property is only positive after you do your on paper deductions ie: depreciation you would purchase the property in the name of the highest income earner?
Also, doing my research it seems apparent that the positive gear properties are too old for depreciation to matter much, or at all. Does the depreciation, fittings and fixtures ‘angle’ not come into play at all in Steve’s strategy?
It seems to me the negative geared with positive cash flow is the happy medium. FYI my initial priority is to find a way of reducing my PPOR debt substantially and rapidly.
My brain is fried from all the sleepless nights calculating and exploring options.
Thanks for letting me ramble.
Ally
Hi Ally,
Another alternative is to set up a company structure to purchase your properties. This way the income is taxed at the company rate rather than your income rate. There’s also trust structures but I’m not sure on the tax associations with them. Read through previous posts for a bit more info.
Also, according to a Quantity Surveyor at a seminar I attended last year (Richmastery on the Gold Coast) you can claim full depreciation on fixtures & fittings even if the property is 100 years old and has a written down book value of $0 for all.
The logic – YOU bought the property with the current fixtures & fittings, therefore they cost you money on purchase. If the previous owner said he was going to strip the property back to a shell before he sold it to you, would you expect it to cost you less or the same price?
A good quantity surveyor will also get a higher than original purchase value for all fixtures & fittings. This is a combination of current replacement cost and an “estimated” cost for installation, delivery, supervision of installation etc. A good surveyor can get you upto double the current replacement value.
Good luck, Leigh
Hi Ally To my way of thinking if you are earning money from it, it is positively geared & if you are paying into it, it is negativly geared .I dont think you can have an each way bet.But im an electrician with 0 quauls in this area maybe someone else knows for sure. Regards Andy.
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