Hi all,
I have started a new job in the past 6 months. I'ce gone from earning approx 50k a year to over 90k a year and I'm looking at earing over 120k next year. I'm looking to sell the house I'm in right now and buy one in parramatta either on my own or possibly in a trust with my mum and or sister and or partner. I'm not to well versed in this area and I've read some great things on the site which I'm trying to get my head around and I have a few questions. Is negative gearing a good idea for someone in my position or are there better ways for me to reduce the amount of tax I pay, so I can save for a deposit faster as well as pay off my loan quicker. I have a mortgage on current property of $300k and my house is worth $400k my mum is about 7 years from retirement and my sister is in her early twenties and I;m in my late 20's if that helps?
Any advice would be much appreciated
negative gearing is a good way to save tax, but this may not help you save in child support. I am not sure, but they will probably have a formula to add back any negative gearing benefits so that you would have to pay on gross income before deductions.
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
. Is there a reason to avoid a parents responsibility to do anything other then the utmost to support their children?
….. not enough of a pay rise…???Look after your kids!
Ahh the old look after you kids catch call. I currently pay for my sons school fees {private catholic school} as well as pay child support. I don't see why I should pay both when I know that the child support is funding my ex wifes trips away with friends, shopping etc etc. I have no problem paying child support , providing that is goes to my son. I will happily pay for his education as I don't want him to go to a public school in the area they live but to pay both and now more because I am successfull and she refuses to get a job just doesn't sit right with me.
Anyway back to the point. Is there anyway to minimise the tax I am paying now without negative gearing Terry ? I'm trying to save up for a sizeable deposit as well as putting a few bucks away for when my sons goes to high school.
The only way to minimise tax is to reduce your taxable income. You could do this in 2 broad ways.
1. earn less
2. Find more tax deductions
(or 3. combo).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
Just watched some Hans Jakobi DVDs a few nights ago, and I remember the accountants talking about something along the lines of asking your employer to make payments for your home loan on your behalf (fringe benefit?), which will then lower your taxable income. Maybe someone can elaborate on this? I also recall other members in this forums mention that you can salary sacrifice some income into superannuation, and that your don't get taxed as much (15% compared to 30%?), although you won't be able to touch the money until you retire, and there is always the possibility of the Government changing the rules between now and 25-30years from now.
Are you looking to purchase the new property to live in?
Generally, its not recommended to purchase your house in a trust because:
1. You do not get the main residence CGT exemption and will have to pay CGT when you sell.
2. You will have to pay land tax (although some trusts do not).I know very little about family law, but I doubt having the property in a trust would help you avoid child support.
If you are buying as an investment, negative gearing will obviously reduce your income tax. Not sure about child support, but investment losses are added back for a lot of government income tests.
If you want to purchase alongside a family member or partner you should consider the implications in the event of a dispute or falling out.
In terms of salary sacrificing your mortgage payments, it doesn’t really work unless you’re in the 46.5% tax bracket. The reason being is that the employer will have to pay 46.5% Fringe Benefits Tax, whereas in your current situation they can pay you a cash wage and only pay 31.5-38.5% tax (being your marginal tax rate).
You could also consider moving in and renting out the spare rooms as:
1. You keep the main residence exemption for CGT.
2. You can deduct the property expenses and interest costs
3. You can later move out for up to 6 years and keep renting it out while keeping it exempt from CGT.
4. You save tax which you can put on your mortgage, and the renters help pay it off.The rules regarding the above are quite specific though so you would definitely need to seek advice before doing it.
mike h wrote:Are you looking to purchase the new property to live in? Generally, its not recommended to purchase your house in a trust because: 1. You do not get the main residence CGT exemption and will have to pay CGT when you sell. 2. You will have to pay land tax (although some trusts do not). I know very little about family law, but I doubt having the property in a trust would help you avoid child support. If you are buying as an investment, negative gearing will obviously reduce your income tax. Not sure about child support, but investment losses are added back for a lot of government income tests. If you want to purchase alongside a family member or partner you should consider the implications in the event of a dispute or falling out. In terms of salary sacrificing your mortgage payments, it doesn't really work unless you're in the 46.5% tax bracket. The reason being is that the employer will have to pay 46.5% Fringe Benefits Tax, whereas in your current situation they can pay you a cash wage and only pay 31.5-38.5% tax (being your marginal tax rate). You could also consider moving in and renting out the spare rooms as: 1. You keep the main residence exemption for CGT. 2. You can deduct the property expenses and interest costs 3. You can later move out for up to 6 years and keep renting it out while keeping it exempt from CGT. 4. You save tax which you can put on your mortgage, and the renters help pay it off. The rules regarding the above are quite specific though so you would definitely need to seek advice before doing it.Mike,But you would lose the CGT free status of your main residence if you rented out rooms. The part rented out would be subject to CGT and the 6 year absence rule wouldn't apply while living in the property.
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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