Hi,
Just was wondering about the deposit that a wrapee gives the wrapper. From my understanding that is what is used by the wrapper to then go on and use for the deposit on the next house purchased. Is there tax payable on that, in which some should not be tied up in the next property or is it seen as getting investment back which the wrapper had to shell out in the very first property purchased.
Hope that makes sence. Just wanting to see the flow effect from starting one to having many and if much more personal cash investment is needed by the wrapper after the first one.
Thanks in advance![biggrin]
Hi,
Hmmm – a simple question with a complicated answer. While a full outline of the suggested tax treatment of a wrap is outlined in The Wrap Kit, here’s a quick summary…
1. It is the contract price margin that is taxed rather than the deposit as such.
2. The contract price margin is then taxed on the basis that your bring the income to account. For example, if you make $20,000 contract price margin then perhaps you may choose to bring to account $1,000 per annum (plus interest).
In this way the deposit becomes part return of capital and part profit, but it is all tied up in the contract price margin brought to account.
As I said… this is a little complex which is why there is a whole section in The Wrap Kit.
Hope it has helped rather than confused. [blink]
Cheers,
Steve McKnight
**********
Remember that success comes from doing things differently.
**********Steve McKnight | PropertyInvesting.com Pty Ltd | CEO
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