Hi everybody here,
I have a home valued $300,000 and already fully paid, I am planning to use the equity, about 240,000, for Property investment, but my wife who refused to do so[
] , because we have three kids and she gets the Parenfts payment & Family tax benefit from center Link. she afraid that the Centre Link will stop her benefits. I would like to hear any advice for our situation.Thanks
andy123 [xx(]
Hi Andy,
I am not meaning to be rude when I say this, so please don’t get offended….[
]I would rather earn $100 and pay $50 tax.
The end result means that I am $50 better off than I was before.[:p]I would not worry about losing the centrelink benefits, because you will be earning lots more than what the payments are anyway.
I’d rather earn my wage than receive my money…
Good luck, [^]
Del
Absolutely agree with Del here. I cringed when I read that your wife doesn’t want to lose the benefit.
However, I realise you do need to convince her, and show her the benefits. Perhaps see if you can go to the Centrelink office, and discuss with them the effects on that payment if you were to buy an IP – either negative or positive, depending on which way you really want to go.
Only when your wife sees some figures in black and white will she be convinced I think. I mean, if she loses say $1 for every $2 extra that you earn, then you could earn $100, she would lose $50, but you would still be up by $50.
Cheers
MelAndy,
If you are negatively gearing a property Centrelink will add the loss back so you will be incurring expenses that Centrelink do not recognise. Nevertheless if it is negatively geared the worse they can do is say the property has zero effect on your entitlements. If the property is possitively geared yes you wife will start to lose Centrelink entitlements but just what depends on whose name the property is in and your income levels. At a worse case scenario (assuming you are only going to buy one or two properties) you could lose more than 80% of the possitive income but very unlikely with the right planning.
For example if it is negatively geared use salary sacrificing to show the property as positively geared in your tax return but reduce your other taxable income without reportable fringe benefits because otherwise deductible. This will actually increase your part A entitlement and if the property is in your name only it will not affect your wife’s part A.
or
If you are in a high tax bracket you can use salary sacrificing to effectively transfer some of your income to your wife. She may lose her Part B but you are saving more in tax than the rate at which Centrelink reduce her part B and as Part A is based on combined income you are in the same position as before the rental property because again the amount you salary sacrificed has reduced your taxable income anyway.
There is a salary sacrifice kit on our web site http://www.bantacs.com.au but it does not discuss the Centrelink ramifications. If you e-mail me your income details and children’s ages I will give you a better idea, though it is not easily explained.my understanding re centrelink payments is that some are income and others income and asset tested. The parenting paymnet is both i understand and I think the asset cut of is around $212,500 (not including the family home, but basically everything else). So you would not only need to consider the effect of rental income (for you and her) but also the asset. We have been in a similar situation and are very close to the asset cut off at this stage as we have a rental property. Our equity in the rental is $40,000 on paper as they are taking our purchase price as it’s value. Given the market now if they revalue the property our equity will be more like $110,000 and therefore our Centre link parenting payments will stop. We don’t care as our overall strategy is more imporant. Having said that however timing is important and we are waiting until next financial year to buy additional properties. Centrelink generally revalues properties in July or September apparently so we think we will continue getting payments until July and then go for it with buying more properties. Until then just researching options and setting up for it. Anyway just some food for thought. Good luck understanding Centrelink!!!!
hi all
i would suggest if you buy cash positive properties you set up a family trust.
when it comes to distributions you can give $416 per annum to each child and pay no tax. you will also discover the whole new world of deductions which will balance out the rest of the profit.
With the trust if there are more profits made they can be distributed to yourself, your wife (according to tax and benifit payments) or you can donate the money away. if you belong to a church you can give it them as a distribution from the trust. Donations to churches are not tax deductable from earned income.
regards westanI find +ve cashflow deals in New Zealand which I sell to other investors. To be on my database send an e-mail to [email protected]
Take a read of this thread.
http://www.somersoft.com/forums/showthread.php?t=12331
Cheers
Simon Macks
Mortgage Broker
[email protected]
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
A trust may not work with Centrelink.
They now deem the assets of the trust to be your own personal assets if you control the trust. I think they define control as being the appointer or the trustee.
The same for companies.
I would just give centrelink a call and get some info sent out.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Andy,
Centrelink payments are either income or asset tested. They are never both. Centrelink will always choose the test that will produce the lowest payment.
The owner occupied home is an asset that is excempted from the asset test, any other asset, and that includes your own home content, jewels, paintings, cars, boat, holiday home, money in the bank, shares, redeemable life insurance or any other asset counts.
Asset: http://www.centrelink.gov.au/internet/internet.nsf/filestores/fis004_0210/$file/fis004_0210en.pdfIf you use the equity of your own home to purchase an IP, even when your IP is zero as an asset (assuming you borrow 100%) the portion of equity you use for such purchase becomes automatically an asset.
In your case, if you borrow 240,000 it will be treated as if you have an IP worth $240,000 even if you owe the whole amount. What I do not remember if there is a prevision for a threshold or percentage that is not taken into account. I am almost sure it is something like 50% or thereabouts, I could tell you tomorrow.
As for the other speculative comments about how Centrelink calculates your wife’s family allowance and parenting payment … well … Do yourself a favor and call the Family assistance office 136150 they will work out how much payment you will lose. If you sense the person on the phone, does not know much, ask for a senior person or better ask for a financial information officer (FIS officer) by calling or being transferred to 132300.
I agree with some of the comments that say if you earn 100 and lose 50 you are better off. Such comments though do not necessarily apply to your case.
If you borrow for +cash flow, you may see some money coming in, but not necessarily enough to compensate for losing 2 or 300 dollars a week. If you buy with negative cash flow, the situation is even worst. You will sacrifice your allowance plus some money you will need to throw in every week for a hypothetical pot of gold at the end of the rainbow. (In addition, you have to sell the rainbow to cash your gold in)
I therefore disagree with the “wife booing” exercise, and say, do your sums, she may be right … or not, I cannot comment much less judge, with the little information given.
If I may suggest an alternative, instead of going so heavy in, with 240k, find a smaller town, do your research as to the potential of such town, and buy a bottom of the market house for less than 80,000. Providing you can rent it for 160 or more, you are in the positive as a rule of thumb. Your wife keeps her payments, and you have a foot in the door with your property portfolio.
Remember you ARE what you think!
May God bless you
and prosper you.
MarcI am not going to comment as such on what you should do or not. I am going to say this, far too many people depend on a government benefit and become trapped by that.
Now you say your wife booed the idea. What she is looking at is some income security and the loss she thinks. Centrelink benefits are there for those that are perhaps earning less of an income than others for whatever reason.
I am neither condoning or disapproving of someones opinions or reasoning regarding centrelink.
I find people are fixated in this unnatural beleif that they are losing something. In some cases this is not so. Its called the poverty trap.
You see some possibilities, I think she is just scared of the debt you are about to go into and the supposed ‘loss’. You are more fortunate than many, at least you are no longer paying off a loan, but hey, you could be using that money/equity to acheive other possibles and at very little cost.
I beleive your wife needs reassuring, the figures will probably mean nothing at the end of the day, when all she can see is those dollars no longer coming in, and a new mortage to take care of. Security.
Unless she can be convinced she will always cling to the benefits.
On another level, the reaosn so many people get into trouble with centrelink payments are because they have two methods for calculating, one is called disbursement and the other…well I cant recall. People have to tell centrelink (for family benefits) that their income will be X for the year the benefit will be worked out accordingly, or they can wait until the end of the financial year and then centrelink re evaluates, and in many cases you end up paying them back money.
do the sums, but dont let that stop you progressing, there is more to life than a few government dollars in this way…..get it another way.
Elves
] , because we have three kids and she gets the Parenfts payment & Family tax benefit from center Link. she afraid that the Centre Link will stop her benefits. I would like to hear any advice for our situation.
]
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