Hello,
I’m after some Advice,
I currently have 2 Property’s, one in which I live in and an IP
I’ve been told by my tax advisor that I should look at selling my investment property because it is now making money and is not tax effective,
I’m reluctant to do this as the property is in Kalgoorlie and has increased in value a lot.
I originally bought this property and lived in it for 5 years then I moved out at the start of 2004.
My tax advisor is also telling me that I will pay a lot more CG tax if I don’t sell soon, at the very lest I have to hang onto this property for the next 12 months but after that I will have to make a decision.
I would rather buy another property that I can negative gear to help with taxation, because I also earn $120000 plus a year.
My questions are; Will it be hanging on to the investment, and getting 3rd property to negatively gear or selling this on and buying new and putting profit into the house I reside in?
Any Advice would be appreciated
Thanks
That is the DUMBEST advice I've ever heard.
The whole point of this investing caper is to make gobs of passive income, so that you can replace your earned income and tell the boss to get stuffed.
Aside from that, Kalgoorlie is still in a boom, and the rents are increasing. I should know; we've had 2 properties there since 2003, and it's going great. They are both cashflow positive.
If you don't sell it, there is no CGT to be paid ever.
We have used the equity in ours to buy more, and this whole process will be repeated again and again.
Never, ever buy a property to offset a tax situation. Having a tax bill is a sign that you are making money, and, of course, there are always tax deductions and depreciation that will minimise your tax anyway.
Rather than sell the current one, I'd be calling the PM and asking for a printout of what they've got for sale there now, and using some of the equity from the existing one to go again, and look at buying one that is cashflow positive after tax. This will require the property to be built after 1987 to maximise the depreciation.
I get sent an Investment Property spreadsheet from my PM every other week, listing what they've got for sale, and it's still all good as you probably know . They are Wades FIrst National.
Hmmm….if I was you,…. I would sell the accountant and then get a new one!
CheersSwany
Maybe the accountant is thinking of using the main residence option to avoid CGT completely. You can only be absent for up to 6 years so would need to act soon. If you have a large debt on your new house selling would probably be a good option as you can pay off this non-deductible debt and reborrow to buy more property. Work out if the interest and tax saved would justify the selling and purchase costs.
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
Thanks for the replies,
Terry, my accountant was telling me now is the time to sell before I pay more capital gains (the longer i hold onto it)
I still think I would be better off keeing it as a investment and buy a new property.
The house in Kal was bought for $170,000 and is worth around $360,000 with a rent being $390 a week and the repayments are only $242 a week with only $120,000 left on the loan.
The house i currently live in was bough for $337,000 and i borrowed another $40,000 for improvements, repayments on this are around $600 a week.with the above info am I best to buy a new property?
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