Hi Novice,

Thanks for your post and welcome to the forum.

First off, let me say that while you have purchased a property that I probably wouldn’t have, at least you are in the market and will now benefit from practical experience.

So, to that extent, congratulations on making a decision. Now it will be important to maximise your investment rather than just letting it drift along. I’d be looking to answer the question -“how can I add maximum value for minimum cost?”

Now, to answer your questions:

quote:

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1) what will be the tax implications or cashflow effects of having a negatively and positively geared IP?

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You will be able to use your property loss to offset your assessable income and reduce the income tax payable on your salary income.

A quick crunch of the numbers:

Rent: $16,952
Interest: ($20,895)
Rates: ?
Insurance: ?
Property management: ?
Repairs: ?

It looks like you will need to pay $100+ per week for the property. A portio of this will come back to you as a tax benefit, but the majority (that is 1 – your marginal tax rate) will be lost and will need to be recouped through capital gains.

quote:

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2) will the loan interest on stamp duty be tax deductible?

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The loan interest will be providing the property is used for investment purposes. As I understand it, the stamp duty is a capital cost and must be accumluated into your purchase price.

A good post on the topic is:

https://www.propertyinvesting.com/forum/topic.asp?TOPIC_ID=1174

Thanks again for your post and have a wonderful day.

Bye,

Steve McKnight

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Hi,

Break Free Events are promoting him.

I’ll be going along to the afternoon session as I am busy that night.

Should be interesting. I’ll report back with my opinion after the event.

Bye,

Steve McKnight

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Remember that success comes from doing things differently.
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Hi,

There has been plenty of press lately about the windfall gain that the Victorian government has pocketed from Stamp Duty in recent years.

The boon has arisen by a circumstance that is very similar to salary ‘bracket creep’ in that while the rates have not increased as such, the rise in the value of properties has meant that more is collected.

I often wonder how the present Vic. government would function but for the massive revenues collected from gambling and stamp duty.

However from an investing perspective, the higher stamp duty just becomes an increased cost to business (the business of property investing).

It’s swings and round-abouts as I see it – in Qld you have to pay the stamp duty within XX days of the contract being signed, in Vic. it is due on settlement. In NSW, property is generally more expensive, so while you pay less in stamp duty, finding a cheap property can be more difficult.

At the end of the day you just need to factor the charge into your number analysis and so long as you’re making headway towards your investing goals – keep your eye on the big picture.

Regards,

Steve McKnight

P.S. Silkwood – thanks for your post and welcome to the community.

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Hi,

It does not matter when you bought the property (unless it was pre-CGT).

It’s very unlikely that you will be eligible to claim an outright deduction for capital improvements.

However, you may be able to either write them down or alternatively depreciate them. Whether or not this is applicable must be discussed with your accountant as the rules are a little tricky.

If the capital costs cannot be depreciated or written off then they may still form part of the property cost base. That is, if you have a property you bought for $80k and you spend $50k renovating it (which is non deductible), then the cost for CGT purposes will be $130k when you sell.

The cost base is then recued to the extent that the expenses are deductible or written off.

Cheers,

Steve McKnight

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Hi Leigh,

We did just what you mention here on the basis of telling our financier what we were planning to do and them agreeing before the project commenced.

We received 80% of the purchase price + 80% of our renovation costs.

Bye,

Steve McKnight

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Hi,

There are two focuses you can have in property.

1. On the Property

This means you focus on the property, usually seeking capital gains returns. As such, position becomes very important.

Things that will increase the value are variables that add to perceived or actual value which cause demand > supply.

In the house vs. unit debate – everything being equal I’d buy a house because land appreciates while buildings depreciate.

2. On the Person

You are not so worried about the location of the property as you are the yield and the quality of your tenant or wrap/lease-option client.

It’s not just a matter of where to invest… you also need to clarify what you’re investing in too.

Cheers,

Steve McKnight

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Hi,

My experience is the same as Nicks, which is not to say it can’t be done, just that it might be difficult.

Worst case scenario is to buy, wait six months and then refinance.

Bye,

Steve McKnight

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Hi,

Selling it to yourself, living in it for one year and then selling it again sounds a lot like a scheme to avoid tax and you would likely fall foul of the taxmans green audit pen IF you were caught.

The way around this is to mount a reasonable argument for why you had to move into the property and then why you decided to sell after a year. If you could do this then you might get away with it.

The other option, which avoids CGT, is to just access your equity by refinancing your loan. The downside of this is that you have more debt (higher risk) and have to pay interest.

Finally, remember that there is a CGT discount of 50% provided the end taxpayer is an individual. I think that if you make money you should expect to pay tax – just so long as it is as low as possible.

Bye,

Steve McKnight

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Hi EmmaB

Welcome to the forum. Thanks for your post and I wish you well with your searching.

As far as a glossary goes, try this one:

http://www.ljhooker.com.au/buy/buy_one.php?list=gloss

Bye,

Steve McKnight

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Terry –

Yes please! I’d love to know how it all works out. This is an excellent ‘case in progress’.

Bye,

Steve McKnight

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