HI,
Hoping someone can give us some information.We are looking at buying our first property – will be investment property as not needing a place to live in as of yet as in company housing for free.
We are looking at purchasing a property to help with the amount of tax we are getting taxed at the moment as on the high end. Is this a good reason to look at buying property? We have cash ready to buy, however i have been told that it is better to have a mortgagee for the tax offset?
we have also been told renting for a lower rent will help for tax? is this also true?
really not sure what we should be doing! we are trying to lower the tax we pay any information would be grateful.thankyou
The title of your thread is about Capital Gains Tax but judging by your post you are asking about negative gearing tax offset for holding a property. If you are enquiring about how to maximise the negative gearing benefit against your high income then the simple answer is to borrow the maximum possible for your IP, Say 105% and don’t put any of your own money in even if you have it available to put in.
Buy a property for tax reasons is not a good way to proceed. You should be buying if it is a good investment and taking into account any tax isues as well.
Whether you should use cash or borrow also depends on a number of factors – not just tax. One consideration is if you use cash you would be saving 6.5% in interest you would have been paying to the bank if you borrowed – so by keeping your cash can you get a better return than this?
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
you can buy any kind of investment to loss money and lower your tax. then you will pay low tax !
take a extreme example, if you don't work (make money) then you don't have to pay tax !
Some people don't make any money, and just apply for society welfare !BUT why will you want to do that ? just like Terryw says buying a property for tax reason is not a good way to proceed.
maybe it came across wrong! we are looking at buying an investment property to keep for the future… and we thought it would also help with lowering tax atm…
I think you are going about this the wrong way. You buy property ( or ANY investment) to make money. Remember to get a tax deduction you are LOSING money.
Yes you can lower the rent. You could even let someone live there rent free, that way you’d save heaps of tax.Some people do negatively gear but they assume the capital gain will compensate them for their losses. There are also other things which assist, eg depreciation.
When investing the idea is to make money. The tax savings are the icing on the cake. The tax savings are not THE cake.
Maybe get some basic books on property investing and go from there. Flick through some at the library or a bookshop to see which ones appeal to you.
simple math, you loss 10k on your investment property (lower rental or paid interest.. ), you may only get 5K (highest income tax rate) back on your tax.
Tax is just one consideration of investment, not your purpose. Paying 1 m tax, means you can earn 1m at the same time.
If your current income is pretty reasonable, and you think you are paying too much to ATO. You can buy a negative gearing investment property to lower your current annual income.
Then when you sale, it becomes a problem. Cos that's when the Capital gain comes into the game.
If your other income in the taxation year is still high, you will still end up paying a lot of Tax.
However, the beauty is Capital gain is calculated to that taxation year only. If you can time it right, and sell it when your other income is low or none, then….. Talk to your accountant.Also, your initiation might be some tax saving, but when comes to investment, the priority is always make money.
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