Hi Alf,

Don’t quote me on this (IE. This is NOT advice), but my understanding was that:

1. Fixture and fittings depreciation is 100% repayable (ie. outside the 50% exemption).

2. The building writeoff came off the cost base of the asset, and as such was OK re: capital gains purposes.

Quick example…

A. $100,000 property bought (nett) 7/2001
B. Depreciation b/w 7/01 and 6/03:

Fixtures and Fittings: $10,000
Building writeoff: $3,000

C. Property sold for (nett) $150,000 in 6/03
D. Tax calc:

1. Carrying value of the property is $87,000 ($100,000 – $10,000 – $3,000).

2. Taxable profit on sale therefore $63,000 ($150 – $87,000).

3. Of this taxable profit:

$10,000 is a balancing adjustment as it represents recouped depreciation (fully taxed at the taxpayers applicable marginal income tax rate)

$53,000 is a capital gain, of which 50% would be exempt and 50% taxed at the taxpayers applicable marginal income tax rate.

Ie: amount to be included in the tax return:

Balancing charge: $10,000

Included because the asset appreciated, rather then depreciated!

The only way to get around this is to individually itemise on the sale agreement what you’re buying and pay more for the land and less (ie. book value) for the depreciated chattles.

and

Capital Gain: $ 26,500

Hope this is clear enough… this should definitely be discussed with a qualified tax adviser.

Further Study

Balancing adjustments:http://www.ato.gov.au/individuals/content.asp?doc=/content/31610.htm&page=5#P402_36398

Capital Works
http://www.ato.gov.au/individuals/content.asp?doc=/content/31610.htm&page=7#P585_51465

Items affecting an assets cost base
http://www.ato.gov.au/individuals/content.asp?doc=/content/31610.htm&page=7#P689_60350

Specifically For You

quote:

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Also if anyone knows if one claims say 2.5% building dep. on 100000 building cost.

[email protected]%=2500
30% tax rate=750

which figure does one use for the CGT the 2.5% or the 750 30% tax rate.

---

Your cost base would be reduced by $2,500.

quote:

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The other question i have is if one sells in the financial year and makes a profit is that profit added to the say wages taxable income so one pays the higher tax rate.
eg.
taxable income 48000
profit 90000
CGT………? 30% or at 48.5% for calculation
is the tax worked out at 48000 that is 30% for CGT purposes or the higher tax rate of 48.5%

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OK – I assume ‘profit’ here is CGT, yes?

If so, and it was an individual, then 50% of it would be exempt, so included in the tax return would be:

salary (?): $48,000
capital gain ($90k * 50%): $45,000
Taxable income: $93,000
Tax payable: $31,090 + medicare

Hope this has helped you understand the concept further.

Cheers,

Steve McKnight

**********
Remember that success comes from doing things differently.
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Hi,

Interesting post… let me know if you give it a go and whether or not it keeps that hungry ants away.

There is a termite association (no kidding – Australian Environmental Pest Managers Association)

quote:

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Australian Environmental Pest Managers Association Ltd represents professional pest managers and promotes the interests of the professional pest management industry.

---

Website: http://www.aepma.com.au/

Perhaps a call (1800 252 772) to these guys to see what they think might be worth it.

Cheers,

Steve McKnight

**********
Remember that success comes from doing things differently.
**********

Hi,

Here’s something perhaps out of left field… pls don’t take it personally []

I suggest that a large part of your problem seems to be that you wait until tax time to get all your reports together.

You’d be better served allocating an hour a month to keeping the records in order, perhaps on something like MYOB and the just running off summary sheets for tax purposes.

Sometimes electronic record keeping is more effort than the old yet simple paper trail anyway.

No matter how efficient the software, responsibility for using it and retaining control remains with the investor.

Anyway, just another angle to think about the issue, if appropriate.

Good luck!

Steve McKnight

**********
Remember that success comes from doing things differently.
**********

Hi,

Hmmmmm… I sense this is dangerous ground, but oh well.

The Bible is clear that you cannot serve two masters, and that you must choose between serving God and serving money.

Having said that, my understanding is that financial freedom is a great goal, provided that you keep God as the #1 priority.

It is certainly no sin to be rich, so long as you remain humble before God and mindful that it is He who blesses you.

This is a work in progress for me, and might actually one day turn into another book.

Clifford, if you want to get in touch, send an e-mail to [email protected]

Cheers,

Steve McKnight

**********
Remember that success comes from doing things differently.
**********

Hi,

I’ve enjoyed reading this thread.

I used to lecture auditing at RMIT, a university here in Melbourne. As I was (and still am!) a registered company auditior, I was well qualified to take the topic.

Anyway, I took the part-time class, which was full of people who worked during the day and were studying at night. I’d regularly get up to lecture, only to be sidetracked and move on to the topic of application of the theory in an audit, business and investing context.

I quickly became disillusioned when the vast majority of students just wanted to know what was one the exam, and then to get home asap.

In fact, that’s the reason I stopped lecturing, I only wanted to teach people with ears to listen!

Lesson to me: you can’t keep everyone happy all of the time, no matter how hard you try.

Lesson to me: put a price on information that means that people have to respect it. What you sell it for is the value that you attribute it to!

Lesson to you: it’s not theory alone, but the application of the theory that will be the essence of your success.

Oh, and, if you pay peanuts, you’ll be buying from a monkey!

[:0)]

Steve McKnight

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Remember that success comes from doing things differently.
**********

Hi Mini,

You wouldn’t believe it. I stayed up past my bedtime to watch you on the tellie the other night (actually, I was doing some work on the laptop and listening to the tellie).

Jules muted it during an ad break and left the sound off for about 5 mins. I went and turned it back on 5 mins later, only to learn that that’s when you did your bit []

Shucks.

I’ll have to wait ’till next year.

Did you have a hand in writing the lyrics or music for that song?

Cheers,

Steve McKnight

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Remember that success comes from doing things differently.
**********

Hi,

A long post…

My advice to anyone in a similiar circumstance is to follow the logic in Ch. 17.

1. You need a plan.
2. You need to work out what you want to sacrifice for a new opportunity.
3. You need to take action.

Positive cashflow properties exist when you know what to look out for and how to be creative in setting up a deal.

I save this specific information, which cost me hundres of thousands of dollars to acquire and finetune, for those who are willing to attend my seminar.

Have a wonderful day.

Bye,

Steve McKnight

**********
Remember that success comes from doing things differently.
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Hi,

I guess there is only so much information that can fit in one book!

Yes – I use accounting structures that limit my liability. My structure is outlined in the WealthGuardian product (see: http://www.PropertyInvesting.com/resources)

However, for land tax purposes, this is largely irrelevant as common entities are grouped (except where you invest interstate).

Also, remember that land tax is on the land value only – not the total value of land + building.

Cheers,

Steve McKnight

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Remember that success comes from doing things differently.
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Hi,

The principal component of loan repayments is not deductible.

And the interest component is only deductible to the extent that the loan it attracts to was taken out for profitable investing purposes.

Cheers,

Steve McKnight

**********
Remember that success comes from doing things differently.
**********

Hi,

It’s sometimes necessary to move posts around into their proper forums.

Sorry for the confusion.

Bye,

Steve McKnight

**********
Remember that success comes from doing things differently.
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