Hi all
I know there are many variables and each case would be different, but, is there a rough "formulae" or an estimated figure of how much worth of deductions you would have each yearh.
I will assume that the person has only recently acquired the rental property so this is in the first years …
I will assume that the property is worth 400,000 and is rented out for $350p/w.I guess there would be around $25,000 worth of interest deductions and around $10,000 in all the bills etc.
Around $18,000 in negative gearing (20 year term loan).So far I've got $53,000. Is this possible? Or does it sound too high???
Plus depriciation. What would a rough depriciation figure be? I know it depends on the condition of the house. But lets use a 20year old house and a brand new house (built by myself) as examples.
Would there be $10,000 worth of deductions for depreciation on a 20yo house?
How much more would there be for a BRAND NEW house? Around $20K???Your examples and/or estimates would be greatly appreciated
Hi
Use our depreciation calculator to work out how much you can claim.
Find it here
http://www.washingtonbrown.com.au
Regards
Tyron
Thanks for that!
))
It works out to 12K for the first year for a brand new house. I'm guessing a 20yo would be around 5k or less.This all works out to around $65,000 in the first year. Does anyone else have deductions adding up to a similar amount or are my calculations/estimates completelly off? :S
To get the maximum benefit out of this is it best to split the deductions between a husband and wife?If I only earn $55,000 a year. Is the maximum refund I can get ~12,000 (because this is how much tax I am paying)?
Hi Not so Lucky,
I'm assuming your $53k deductions is made of your figures of $25k interest + $10k bills+ $18K "negative gearing"
Firstly, the $25k interest sounds a little high for $400k property. You'd be lucky to get a loan with 95% LVR so I;m assuming a LVR of 90% on the $400k loan with 6% interest rate. This gives you 90% x $400,000 x 6% = $21,600. But as we all know you can get a home loan with rates closer to 5% these days.
But $10k in other bills is a litle too high (unless you are expecting to pay $6-8k p.a in Body corporate fees of a fancy complex with common facilities like swimming pool, top class secuirty, 5 star hotel like lobby etc). $5k in body corporate, agents fees, council rates etc is more reasonable.
Not sure what you mean by the $18k in "negative gearing" deductions. I think you are getting confused with the tax loss that property investors nromally incur. The negative gearing loss is a result of the rent minus expenses. You are double-counting your deductions if you combine tax loss (made up of rent minus expenses) with expenses.
So excluding depreciation deductions, around $30-35k p.a in deductions is a reasonable estimate for a $400k IP but $53k + depn of $10-15k p.a is far too high in my opinion.
I think you are counting some expenses twice.
Here's my guess:
Interest of approx $18k, Rates, body corp, agents fees $5k, depreciation $5k to 10k, plus repairs.
Total = $23k to $28k. You income based on $350 pw = $18,200.
You would be looking at a tax loss of $5k to $10k.
Dan42 wrote:You would be looking at a tax loss of $5k to $10k.
What exactly does this mean?
not so lucky,
What the tax loss means is
Total net property loss = total property claimable expenses – property income (being rent)
Total expenses = $23k to $28k. Your property income based on rent of $350 pw = $18,200. per annum
Total net property loss= ($23k to 28k) – 18200
Total net property loss= $5k to $10k.
This amount goes into your tax return as net property loss or income (depends on if a loss or total income)
Now this amount is subtracted from your job gross tax assessable income.
The marginal tax rate that this falls into determines if you get 30% back which is the tax already paid on 5K to 10K
So if assessable income was $60,000 then the tax rate is 30% from 34001 to 60,000 earned. So subtract say $10,000 off your 60000 brings your assessable income down to $50,000 so you paid $3000 more in tax than you actually earned.
Hence a $3000 tax return refund.
see
tax rates
http://www.ato.gov.au/individuals/content.asp?doc=/content/12333.htmThank you so much duckster. It makes sense now.
It is worth setting up an Excel Spreadsheet that contains all the income and expenses for your property, with the expenses set out exactly the same as in the e-tax screens, or Tax Pack. Make sure (on a separate worksheet) you set up a depreciation schedule as well, and import the results to your main page. Definitely engage a Quantity Surveyor to complete the Schedule for you. Their fees themselves are deductible.
Then set out underneath that a few simple sums that show your normal salary, plus the loss from the investment property, any other deductions applicable (union, car, gifts, etc), Income Tax Withheld, and then apply the tax rate (including the Medicare Levy, etc) – then all the various rebates if they apply to you – and you will have an accurate estimate of your financial position for the year.
I have been using essentially the same Excel spreadsheet since about 1995 (updated where necessary of course), and it remains extremely accurate indeed. I just transfer the amounts over to e-tax each year. Note that you can only claim the interest on your loan, not the principal as well. This is calculated using the IPMT() function in Excel.
The Excel sheet has an additional useful function – if you wish to reduce your fortnightly tax to improve your cashflow and take-home pay, using the S221D Withholding Variation provisions, then doing the calculation above allows you to do that pretty accurately, 12 months ahead
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