Hello everyone.
Found a little old house in a great location, and the plan is to demolish it and build something new in its place for ourselves. But before that, we want to keep it as a negative geared investment for a fare few years. My question is, is there, from a tax advantage point of view, better to borrow as much as possible (100%) in order to buy it, or as little as possible something like (80%) or less, in relation to negative gearing?
Thanks!George
For tax deductions it is best to spend as much money as possible – but this may not always make commercial sense.
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
George, it depends on what you earn. What is your marginal tax rate?
If it is an old house depreciation on the building costs may not be claimable which could have increased the negative gearing without you incurring a cash outlay in expenses.
As Terry pointed out it may not make commercial sense.If you are on say as an example a 30% marginal tax rate and you spend 5000 in net property loss. What are you claiming back?
30% so you spend $5000 and get back $1500. Based on not having building cost depreciation being claimable.you can check the marginal tax rates on http://www.ato.gov.au
Thank you guys! No, no the house is old (timber, late ’60) but is not a fallen down shack! Certainly without any repairs, someone can move and leave in it in an hour for a good lot of years, no doubt. It will cost -/+ $200000 to buy anyway.We earn over $120000 and around $60000 respectively. So what do you think? George
Would it be cheaper to simply extend and renovate the existing dwelling?
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
It also depends on other factors such as have you paid off your PPOR mortgage? If not then I would be keeping my cash in an offset account attached to that.
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
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