sis,
Maybe I’m missing something here, but I’m wondering how you reduce your taxable income to less than the HECS threshhold for repayment (as you mentioned elsewhere) when you have 13 properties, and employment.
If your properties all received $100 rent, that’s 65k. Plus your employment, which- even if it was 20k a year, would make you have a total earning of 85k gross. Given that it might be presumed that some of your properties might earn more than $100 a week, it’s quite possible that you earn a total of 100k a year.
Now, of course there are expenses- interest rates and all manner of other tax deductions… but how do you reduce your income so drastically as to not have to pay HECS?
kay henry
Hi Kay,
I love this question, alrightie then, remember all my properties are offsetting against each other,
(+ve + -ve = 0) so any real money i make is neutralled out.This then shows that i only really do have income from my job (but yes, i will admit i do have +ve cash flow coming in, as the amount of cashflow coming in is greater than, all the expense in total.) Showing that just my own income from my job is what i am only really earning. Plus only a little bit each week from the +ve cashflow.
With all expense and cost against the properties, im still able to claim a large amount of deductibles, (which is a major cause of offsetting)
So this still leaves me in a position of my job producing well over the HECs threshold.
With the benefits of some expenses, that can be claimed against my earnings, again this will show as a loss against my wage, meaning on paper that i have lost money and further reduce my taxable threshold.
With about 5 of the properties being able to claim depreciation, my taxable threshold still decreases, while my income from my jobs still remains the same, with full tax refund, but at the same time able to roll over alot of tax losses into the next financial year.
for eg.
lets say i have $100k coming in and $95k going out, it shows that i have a cashflow of an extra $5k a year, but lets add in all the added expense that are claimable and that can reduce my tax threshold + my job earnings, i am making profit on paper and in the bank, but these extra expense like depreciation, will show that i have a tax benefit of claiming large amounts of losses, which show up on paper that im losing money but reducing my tax threshold were its roughly saying that i lost more than enough, that i had made no earnings but a loss and that my paper deductions are showing im earning $0 dollars but have been able to claim tax benefits, showing i have a -ve income of about $15k.
What i mean is, when i sit down with the accountant, my earnings for the year look like i have a -ve earnings of $15k under $0 (again showing, i have no income at all,) yet i have expenses and tax benefits that show a paper loss, but an actual profit in hand(bank).
Being able to do this, im showing no income on paper but complete losses, while in hand and in bank, im truly earning, which proves and provides to the ATO, i can’t pay HEC’s cause i have no income coming in due to, the expense and depreciation, that is claimable but lowered my on paper losses under $0 dollar earnings.
Ok, im not sure if you understood it all, but ill try to keep explaining, so you can see how it works.
Cheers,
sisIts almost like -ve gearing.
Instead of offsetting the income against my wage, i have been able to offset it against the +ve cashflow properties, leaving my income full intact, but once you add in expense, my income taxable threshold decreases very quickly, add in the depreciation and then on paper it shows, im making a huge lost, but yet at the same time, im still able to keep all earnings due to this large effect.
So the full amount of money that comes in, is totally offesetted, yet the depreciation, offsets it, even further more, till its shows, i have no income or on paper profit, but all paper losses.
Cheers,
sisThe trick is, you can make money, but on paper, losses can show you are either having no income at all, or you are under the taxable threshold for any earnings to pay any tax. Any further taxable losses, then get carried over to the next year, further again increasing your paper loss, yet still producing earnings and profits.
Cheers,
sisSIS
You seem to be rambling in all of the above posts. You contradict yourself all over the above posts as well. In one sentence you say your properties are slightly CF +ve, in another you say they are CF -ve and in another you call them neutral. You also mention that you are only claiming depreciation on 5/13 properties, which makes it ever more difficult to offset the income. If you are not actually spending the money you claim on expenses (and thus would not have it in hand as you claim) then you are not entitled to claim as expenses (with the exception of dep.)It sounds to me like you are not being totally honest with your accountant about your actual deductions and thus are claiming more than you actually should be. Remember that your accountant is not the one who is accountable if you are audited but rather you are.
I reckon you had better pray very hard that somebody doesn’t dob you in and you are not audited!
Well, I’m a simpleton financially, but I still don;t know how you can reduce 100k income to 0k income- is anyone else able to do this?
kay henry
Maybe this is the reason I pay so much in tax [
!]BC
SIS,
This sounds good in theory but HECS liability is not reduced by any deductions or offsets from property investing. You have income from your job, plus all the rental income – equals total income, which is what your HECS repayments are calculated upon.
I think that either your accountant isn’t very good or you talk a good game.
HECS repayment income
Your HECS repayment income is:your taxable income for an income year,
plus any amount your taxable income has been reduced by a net rental loss,
plus your total reportable fringe benefits amounts shown on your pay as you go (PAYG) payment summary.Hi HousesOnly,
There are 4 types of gearing:
++ve geared (Passive gearing)
+ve geared (Positive gearing)
=ve geared (Neutral gearing)
-ve geared (Negative gearing)With the properties i have they fall into all these categories. Which causes an offset affect.
I do have 2 accountants that do the accounting work for me one works for the ATO and the other one specifies in specifically IP accounting and the other thing is i study accounting and finance.
The guys who do the accounting are very up to scratch and are always, guiding me and telling me, what i must do to ensure control over such funds, so that there is no tax or it is at the very minimal.
If you guys can got a copy of HECS Information 2004 Booklet (page. 21)
This is what it says.
You must begine repaying your debt when your HECS repayments income reaches the minimum threshold for compulsory repayment, which in the 2003-04 incoe year is $25 348
Your HECS repayment income is:
* your taxable income for an income year1; plus
* any amounts your taxable income has been reduced by a net rental loss; plus
* your total reportable fringe benefits amounts shown on your Pay As You Go (PAYG) Payment Summary.
It says it there and this discussion has been brought up in the past, about HECs and property investing.
Just another thing i want to point out, this is nothing, you guys have heard of Kerri Packer, how he was able to completly reduce his tax one year all the way down to $30. and other years were he paid no tax at all.Cheers,
sisHere is a link,
Kerry Packer was also able to avoid paying any tax, actually he did not pay a single dollar to the tax man on a profit of $1.25 billion dollars.
Cheers,
sisIn regard to KP, how many thousands of people does his companies/ businesses etc. employ that are paying tax ?
I dont think your anology is credible, as I for one dont begrudge him paying minimal tax because of the above.
BC
SIS
Your replies are very difficult to follow and you seem not to be telling a consistent story here.
It just does not sound very likely that you would be able to achieve a “net rental loss” when you seem to be neutrally geared (if that is what you are saying?) especially when you say that your expenses are being used to reduce your taxable income but you also mention that you have this cash in hand/bank??? So which is it, have you really spent the cash on expenses or do you have the cash in hand/bank?Hi HousesOnly,
if you read the post again, you will understand, just have another read and will be able to understand, what im trying to explain. It is hard to understand, but ill try to break it down so everyone who cant understand will sorta get a hold of it.
Where you make a profit you pay tax, but if your making a lost, the effect is neutraled out, so there is (+1 + -1 = 0). This is what has simply happend with the properties. Where you make a loss you get tax benefits, where you make a profit there is tax deductions.
This then leaves my income with no losses, how do i bring it down to zero, through the depreciation, that i can claim. Other expenses, that can be used to be claimed against my income, are the insurance fees, stamp duty fees, commission fees, travel, accounting fees, all those fees add up. Cause a bigger claim against my taxable threshold.
Its very simple, but this technique is just called “Offset Gearing” If you guys read over some old post, that i posted long time ago on here, i have explained the fundalments of Offset Gearing.
The cash in hand/bank is term used, when you have made profit, but on actual paper it shows lost, a lost of were, you made no profit.
Just try to understand “Offset Gearing” and you will seen then, how it works and how tax becomes offsetted.
Cheers,
sisHi Guys,
I agreed with S.I.S.
Paying HECS is base on your taxiable income.
Examples.
S.I.S income from job: $60k pa
Income from +ve cash flow $20k pa
Loss from -ve cash flow $20k paTotal income $60k pa
Deductions from all properties $40k pa
Total income recalculated $20k pa (taxable amount)
which is below HECS threshold therefore no need to pay HECS.
If you don’t understand it from me or S.I.S then I can’t say much more than this ie. you might need to pay HECS. May be you should re-read what S.I.S wrote and if you still don’t understand then you might need to print it out and discuss it with your accountant.
Warm Regards
ChanDollars
[Keep going, you’re nearly reach the end of financial freedom]SIS, do you ever intend to pay HECS? If you don’t, then to me that’s the same as people rorting the FHOG, or getting the dole when they shouldn’t. I remember there was a guy on here who was happily claiming to be unemployed, whilst investing in property. I’m buggered if I knew how he did it.
Cheers
rHi Richmond,
of course, eventually one day i have to pay it back, but in the mean time, the debt today may look big, but over time, that same debt will look smaller, to a point eventually were the HECS debt will look like a small drop, or a small fee, due to what the value of a dollar will be worth in the future.
As for paying it, if i can and able to defer it for at least 5-7 years, the current future dollars and earnings will make this HECs debt look small.
Cheers,
sisSorry, but I cannot help but think that is immoral, and goes against the spirit of the ‘leg up’. [V]
BC
Sorry SIS, your HECS debt will be adjusted each year
to account for any rise/fall in the CPI.andy
and no wonder their so keen to get full fee paying students from OS
BC
!]
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