Firstly, I would like to say how amazingly helpful and informative these forums have been!
We are currently in the process of searching for the perfect property to purchase, renovate and sell. It has always been a dream of ours and we currently find ourselves in the financial position to be able to pursue this.
If possible, I would love someone to provide us with a little bit of advice and some clarification whilst we are still in our planning and researching stage of things.
1. My partner is currently on a salary of approx $88k and I am a stay at home mum earning nothing. It is my understanding that the amount of CGT payable is based on your income for the financial year….is this correct? If so, would it be sensible to put IP in my name alone to limit amount of CGT?
2. We are planning on having a quick turn around between purchasing an IP, renovating and popping back on the market. Paying penalty fees for early repayments on the mortgage for the IP concerns me as I am unsure what sort of fees would be payable (this is somehing I can make enquiries on my own with financial institutions), however, I am curious as to whether those who have done this before simply use a standard mortgage or whether there is a lending product available for projects such as what we are planning.
3. Is it best to undertake this as a proper "business" ie register a business name, regiter for GST etc? Are there more benefits to do is this way?
We have another appointment with our FP next week, but we are keen to get things moving ASAP and would like to have all the details sorted.
Thanking you all kindly in advance
Hello Natalieo
It's good that you are going to get professional advice before you start though I think you might consider going to a property savvy accountant as well as most FP are more knowledgeable about managed funds than property.
I am certainly no expert in this area but since no one else has answered ( you might be in the wrong section ) I will tell you what I know.
Re question 1.
Yes, the CG is just added to your other income for the year and so you pay at your top rate. It will certainly mean less CGT if the property is solely in your name. Since you have no income I believe your partner will need to guarantee the loan. Be aware that if for some reason you decide to keep the property you will have no tax advantages with negative gearing.
Re question 2
Sorry I don't know much about the products out there though I remember the question has been asked before. Maybe you can do a search on the site to find previous answers. One tip that I have picked up is that if you have a loan on your home and are planning to use cash as deposit for this IP …. don't !
Unless you have a loan which does not allow you to pay off extra principle than you should use the cash to pay off your home loan and then organise a LOC (line of credit) against it for the deposit. This way you have magically converted non tax deductible debt into deductible debt.Also be aware that with a quick turnaround you will not be eligible for the 50% discount on CGs. To get the 50% discount you need to own the property for more than 12 months. This is calculated from contract signing to contract signing and not from settlement to settlement. Naturally your holding costs go up considerably so you need to calculate carefully which is better for you when the time comes to sell the property.
Hope this helps a little
Elka
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