Hey guys – Long time lurker first time poster here!
Living in our PPOR – in Sushine Coast (Marcoola Beach). We bought it because of work at the local hospital and now I have a new job further south (too far to commute) so my wife and I are moving.
We bought the place for $432k – in retrospect we should have offered less but nevertheless – thats what we paid and we both love it. Prior to us moving in it was being rented for $390 per week.<moderator: delete language>
So the plan is:
Rent it out for around $400 per week (hopefully)
Move to a new place south – rent that for $400 per week (around)Now obviously I will utilise negative gearing in this circumstance. I have done a few hours of reading and I think I have wrapped my head around it but I just wanted to run it by you experts!
So I paid around 30k in tax this year (but promotion next year – so probably around 40k next year)
Mortgage repayments around $3000 per month (basically interest only)
Rent per month = $1600
Loss of $1400 per month <edit>. The Body Corp fees work out to be about $350 per month. (I have not had my fixtures etc valued for depreciation). Total deductions – $1750
So the plan is that I should be able to claim $1750 per month. Does that mean at the end of the financial year I can claim $1750*12 = $21000? How much of that would (on average) get back?
Any ideas/throughts/criticisms?
Cheers
Mike
Hi Mike
You'll be able to claim more than that. There's property management expenses, insurance (landlord and building), rates, maintenance, travel costs (if applicable), depreciation – these are just off the top of my head, there are others that your accountant will be able to advise on.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Ok…
well does this mean I should be financially better off?
If I can claim all of these things that I couldn't claim previously when it is my PPOR and hopefully my rent is pretty equivocal….I should have more cash in my hand? And a considerable amount….can that be right?
Another question:
If negative gearing is best used when your repayments are interest only – would it be smarter to keep your savings in an interest earning account rather than an offset account (which would obviously decrease your repayments)?
Hi Mike,
Yes it appears that you will be better off. If you PM me, I will ask you a few more questions, and then I can give you an estimate of your after tax position in this scenario.
No unless you have some non deductible debt if you dont need the interest on your savings to live on i would be sticking it an offset account.
Make sure you give the Accountant all of the initial loan costs as these are deductible over 5 years or the term of the loan albeit proportionalised from the date you purchased the property.
Some deductions will be cash deductions others non cash deductions.
Probably wise to get a Quantity Surveyors report on the property to what else you can claim.Also remember being PAYG you dont have to wait until year end to claim back and shortfall as this can be done by way of a Tax variation forms 221D.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Is this a good property for an investment?
Tax considerations are nice, and you're definitely paying a lot of tax. Keep in mind though that if you're getting negative gearing benefits, it means you're taking $1 out of your own pocket and getting 40 cents back from the ATO. It's still costing you 60 cents.
If this property will have good capital growth, it's likely a worthwhile investment. If it won't go up in value, you're spending money to get a percentage of it back from the ATO (you're throwing money away).
Take the tax deductions where you can, get a depreciation report done, but don't invest in anything simply to reduce your tax. Make sure there's a good reason for the investment, then figure out the tax benefits.
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