Investment Properties

[Hubble80 Member Find all posts View Profile Close Hubble80]

As this forum is a never ending source of knowledge and wisdom I though I would ask the question here.

I don't want to give away the name of the company who I am looking into, but I will outline the process to see what you guys think and if it is a good idea and in fact legal in regards to tax.

The idea is to use the equity in the house we already have to buy another for investment purposes. We use a tax variation through the ATO to "forecast" how much expenses associated with both properties and use that money to pay off the mortgages.

If anyone has any experiences with this type of tax setup I would love to hear your experiences.

Thanks

Pete

[AJ120 Out of control poster! Find all posts View Profile Close AJ120]

I have numerous investment properties and my accountant has never mentioned anything like that to me, sounds pretty dodgy IMO, forcasting expenses and then using that money to pay of the mortgages? what money, where does it come from? are you getting a tax refund in advance? I would be getting some advise from a qualified Accountant on that one.

My personal opinion on any investment is that, if it doesn't make sense before the tax is taken into account, then it is probably not a good investment. Some other good advise I once read, take a good look at the cash flow, not how much but which direction. If the cash flows out of your pocket then ask yourself why am I doing this, If the cash flows into your pockets then you are on the right track.

Cheers Andrew

[LeighW Avid PP Poster! Find all posts View Profile Close LeighW]

Sounds like negative gearing, though don't know about the "forecast" bit

Cheers
LeighW

[Guest Close Guest]

My forensic accountant book keeper just gave me the scrunched up face look..

I have a similar setup, a loan on my house I owned ("owned before the divorce") outright... To buy a commercial investment property.

I can/ have negative geared my investment property, and claim said interest of the loan for that property. Tax office does not care what the security is over, as long as it is a true investment.

If I had a mortgage on the original "house" that I live/d in, I CANNOT claim anything to do with that legally.

Any upgrades or repairs on an investment property are deductible too, hence your negative gearing phase.

The info you have got sounds very "suss" according to my accountant/ book keeper.. Who comes pretty highly knowledgable on this stuff....

[iantz Avid PP Poster! Find all posts View Profile Close iantz]

Hmmm. Sounds like you have framed it a little wrong (at least I hope so??). Like Piggy says, you include the income generated from your investment and the costs in your typical tax return. Hopefully, the property is costing more than you're earning, and so the 'loss' on that investment comes off of your personal tax because it reduces your assessable income. You could then use that tax cheque (which is often very nice) and pay it straight onto your property.

Like Piggy says, the ATO couldn't care less where the security to purchase the investment comes from. Remember though, a typical house over here of say, 450k has a mortgage of probably $1400 a fortnight. In Radelaide, you'll probably recover around $800 a fortnight in rent. So, you are still out-of-pocket $400 a fortnight to cover the investment, and these payments come in to the picture when you calculate the negative gearing aspects. Like AJ120 says though, you are paying money out of you pocket in the first place, so if you don't have it, it isn't worth the added pressure. If you have a spare $400 a fortnight, then go for it. You'll be rewarded at tax time.

[xlr8_87 Advanced Member Find all posts View Profile Close xlr8_87]

Interesting thread as I'm currently thinking of buying an investment property (still have mortgage on existing).

Can someone explain to me extremely simply what negative gearing is?

Is it simply the out of pocket money going towards your investment property gets listed as a tax deduction?

[LeighW Avid PP Poster! Find all posts View Profile Close LeighW]

Any cost associated with the investment property, ie
interest charged on the loan for the investment property,
maintenance cost, real estate fees etc.

Also you can depreciate any new assets associated with it,
appliances etc.

You can't claim the actual mortgage payments though.

You claim these as a tax deduction of your other income, ie
wages, rent etc.

Cheers
LeighW

[Goodwinfamily Member Find all posts View Profile Close Goodwinfamily]

I have the countries best investment property...... it has an axel name is Jayco and its an investment in my family..........We as both an age group (40+) spend too much time with wealth creation I decided to spend my time on family lifestyle creation...Not knocking the investors just making a point....

[Guest Close Guest]

I would also suggest hedging your bets and looking at other forms of investments too.

I find "My Atm" offers excellent returns. 20% guaranteed for 10 years.. So on a base spend is about 1500 a month returned to your account.. On a 140k spend, nearly 3 k minimum to your account.

Well worth looking at if you actually want to make money or offset money...

[AJ120 Out of control poster! Find all posts View Profile Close AJ120]

Hmmm. Hopefully, the property is costing more than you're earning, and so the 'loss' on that investment comes off of your personal tax because it reduces your assessable income. You could then use that tax cheque (which is often very nice) and pay it straight onto your property.

I understand that negative gearing has it's place, however why would anyone actually "hope" to spend more on an investment than it returns. If you have a $1 tax deduction you don't get $1 back from the taxman, 50c in the dollar is about the most you could get back. Hopefully your income is more than your expenses, then you are making a profit, yes you pay tax on that profit, but you still end up with money in your pocket rather than paying money out, and that is what investing is all about isnt it.

Our properties have been positive geared from day 1, that means we have never put a single cent of our own money into the properties, other than paying down the principal. I also don't see the financial sense in investing in another property if you already have a mortgage on your own home.

One of my goals in life is to have a tax problem, means I am making bucketloads of dough.

Cheers Andrew

[yowie78 Junior Member Find all posts View Profile Close yowie78]

The tax variation is quite a normal thing. You have to apply for it each year. Basically they look at your tax return and use this to work out how much tax you would get back and then the ATO sends a letter to your employer and they reduce the tax you pay. All it means is that you don't get a big refund at the end of the year, you get your tax refund each week in you pay packet. All perfectly legal and above board. If your accountant hasn't heard of this then I suggest you get a new accountant.
In terms of getting tax advice, these guys are the experts http://www.bantacs.com.au/

[LeighW Avid PP Poster! Find all posts View Profile Close LeighW]

I would also suggest hedging your bets and looking at other forms of investments too.

I find "My Atm" offers excellent returns. 20% guaranteed for 10 years.. So on a base spend is about 1500 a month returned to your account.. On a 140k spend, nearly 3 k minimum to your account.

Well worth looking at if you actually want to make money or offset money...

Piggy,

What company is involved with your ATM?

[rags Advanced Member Find all posts View Profile Close rags]

I have the countries best investment property...... it has an axel name is Jayco and its an investment in my family..........We as both an age group (40+) spend too much time with wealth creation I decided to spend my time on family lifestyle creation...Not knocking the investors just making a point....

I with you on this,i can remember my childhood family holidays and adventures fondly but if you ask me what colour my bedroom was when i was a kid and my answer always has been the same no and i don't care. So as a result i have not place importance on wealth and property but rather more on family life which when kids where younger included many trips in the prado and jayco, but at the same time have made sure that we do have our own place to live . Although wealth creation/investing maybe a means for some people to gain security in life i sometimes think that it can come with a big cost to their life and relationships due to financial burden.As my kids have got older and moved away for uni then it has prompted me to have a secure house for them to live in at Newcastle which i guess has got a long term financial result to it but at present little tax benefit but this was not my motivation.It does have an added advantage as it makes trips to Stockton and beaches surrounding accessable .
Rags

[ntp Addicted PP Member Find all posts View Profile Close ntp]

Live for today. Save for a rainy day. No point being the richest person in the graveyard.

[iantz Avid PP Poster! Find all posts View Profile Close iantz]

One of my goals in life is to have a tax problem, means I am making bucketloads of dough.

Yep, and for most people, gearing won't give you the same in return as what it costs. But, there are some other perks to reducing your income. For instance, you can do government super co-contribution, you can claim the education rebate (couple of grand there depending on how many kids you have) and there are a few other things. But, I agree, best option is to have it positively geared. Unfortunately, I really don't think that is possible in metro SA anymore if you are buying into your first investment property. The other bonus for investment property is that if you plan to keep it for 15 or so years, you can make a decent profit from it; something to add to your retirement fund.