Which is the best method of depreciating when holding the property for the long term. This is our first investment property and we do plan on holding it for at least 15+ years all going good, as hopefully it will be the first of many, which we will then start selling one at a time to fund retirement and travel after stopping work?
Also are we right in thinking that all amounts claimed in depreciation then gets taking off the base cost before working out the 50% capital gains after selling?
Thanks for any help
JPS25
Welcome JPS25,
A dollar today is better than a dollar tomorrow (due to inflation), so depreciate as hard as is legally possible (diminishing value).
And you are right on the CGT posted. This is the shine off depreciation that property marketing firms (developers) often overlook and consumers do not consider….
In general, selling your property in years to come is old school, read on this site….lots of tips.
Good questions for a begginner!
Thanks Number 8 for your answer. Will make sure we go for diminishing when we visit our accountant nex month.
So how long is the norm for holding on to a property, we had handover for a new build early June and our first tenants moved in last week. The house is in Chinchilla so with all the mines starting to take off there we thought 15years min the best way to go plus by then we will be early 60's and plan to sell in a year with no other income to minimise the CGT tax implications.
Thanks
JPS,
Rural is different, as you mentioned the mines…. house prices come in waves and you have to predict the highs and lows of the industry as well as other economic factors.
I suppose that is the danger of these sites. I assume circumstances that cannot be displayed through writing. A sell may be inevitable, but equity release should also be considered (I'm not sure your personal details) so it is difficult to be accurate.
Answering your question, everyone has varied circumstances according to work, CGT, children, retirement, income tax etc. But I will hold my property until death and they will be pass on to my children so they may continue the portfolio and release equity as required. I say property is an infinite resource of cash that will consistently flow for as long as you hold possession. The day you sell is the day you give the flow of cash to someone else. That being said, you may sell your flow of cash to land yourself in a better position, i.e. to create a stream rather than a flow….. I hope this helps.
Thanks Number 8
Yes that was what we where orininally planning on doing and just letting it and any future ones pass down to our kids (20 and 17 at present). We went to an ATO seminar a few weeks ago and it was suggested to minimise the CGT that if you if you take a yearoff with no income and sell in that same tax year you will reduce your tax on CGT as it will be deemed your main income for that financial year, that way you are not paying the full tax rate on the CGT. So he said it is important that if you know you are going to sell in a particular year to take leave without pay for the full year in order for this to be benificial in reducing your tax obligations.
We know the mining towns can be volitile and planned to take out equity as it grows to reinvest in more property.It sounds like you are on the right path… yes that is good advice from the ATO, also consider holding on to the property, until all your super monies have been drawn down. The power of time will give you further gains in the property. A common practice is to sell before retirement as opposed to 5-10 years after retirement, effectively another property cycle is not utilised by many people.
As you are experiencing, calculating the best strategy, coupled with the twists and turns of taxation laws and regulations, is all good fun…..Thanks Number 8
That is definitly something worth remembering further down the line, depending on retirement ages by then. The property is in the name of the younger of the two of us only born in 64 so falls under the new age requirements the other is ok to retire early and has no super so maybe worth thinking of super splitting further down the track in order to release some super early and leave the investment properties alone to further increase as you say.
Its nice to get advice of seasoned investers like yourself and very appreciated thankyou
Depending on the super rules at the time it may be advantageous to salary sacrifice your wages in the year you sell to your super fund and then live off the proceeds of the property sale negating some CGT requirements. like I said will depend on the rules of the day!!
Hi Rodjen123
Yes we have always s/s in the past just stopped while building up funds for the investment property for a rainy day so we would also use that as a fall back too when it comes time to sell if not left for the kids.
Thankyou
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