Hi All,
Currently renting. I am planning to buy my first IP in early May. But it may get delayed. I am working and paying lot of tax currently.
So, question here is will it be beneficial to buy before financial year end (30th June) ? or it willn't matter much whether I buy before or after. Please suggest.
Are you referring to the negative gearing possibility. Where rent income is less than all the expenses incurred to produce the rental income ?
If so if you buy in May you are going to have to wait until Settlement before you can rent it out. And you can't claim expenses unless it is rented out or available to be rented out .Settlement usually is 90 days.
So if you rent it out it might also take time to find a tenant.
If you buy after financial year you may have to proportion income and expenses for the first year. So say you rented it out for 300 days in 2010/2011 financial year then you have to part claim 300/365 * annual interest
You need to keep a record of when it was rented out for your accountant and check it out with accountant.If you can rent it out before June 30 you might be able to pay interest in advance for the next financial year.
http://blog.mytaxzone.com.au/2009/06/paying-interest-in-advance.html
Good point to talk to your accountant about Too !It may benefit you, but only slightly as the costs claimable will need to be proportioned on how long you have owned the property during the financial year.
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
Richard, 90 day settlement, not on a std contract in NSW (at least), should be around 6 weeks only, so May will give a June settlement. As he points out you can't claim expenses until it is leased out so you may consider getting earlier settlement or early access to the premises to lease it out (with the vendor getting the rent up to settlement). If you do rent it out before the end of the FY, then you may even consider pre-paying the year's interest in June (if you have an interest only loan).
The main thing will be to get a late May/early June settlement so you can lease it out straight away,
Thank you duckster, Terryw, Scott No Mates
What I got from above is
If I can get the settlement and rent out before June 10. I can pay the pre interest and and show these as an expense for deduction.Few info about my situation
As per my calculation my property will not be -ve geared. It will be either +ve or neutral. And I am planning to get IO only loan with 95% + LMI with 100% offset a/cNow, few question
1. How many months interest I can pre pay ? Any limitation or it all depends on how much money I have for paying.Terryw, suggested I can only calaim "slightly as the costs claimable will need to be proportioned on how long you have owned the property during the financial year"
duckster, Scott No Mates – Suggestion provide by both you looks same. Can you please put lights on Terry's suggestion.
If any information is needed about my situation to help, pls ask.
I was suggesting that any costs may need to be apportioned if the property wasn't available for rent for the whole year.
see http://www.ato.gov.au/content/downloads/IND00191817n17290609.pdf examples on page 11 (or 7).Prepaying the interest would save you the most. You will need to take out a 1 year fixed rate, ie pay 12 months in advance. But you must also consider what will happen the year after when you have no interest = huge profit. a way around this is to do it again.
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
Terry, got it
Now have to check the loan am planning BW, IO, 95%+LMI, 100% offset allows 'interest in advance' or not
duckster, nice article link give by you.
Terryw wrote:I was suggesting that any costs may need to be apportioned if the property wasn't available for rent for the whole year.
see http://www.ato.gov.au/content/downloads/IND00191817n17290609.pdf examples on page 11 (or 7).Prepaying the interest would save you the most. You will need to take out a 1 year fixed rate, ie pay 12 months in advance. But you must also consider what will happen the year after when you have no interest = huge profit. a way around this is to do it again.
Thats a good loan, but if you want to pay interest in advance you will need to fix the loan for 1 year. You can't pay interest in advance on a standard loan like that.
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
Hmmm,
Above deal is @ 6.55%, 30yrs, 15$/pm for offset a/c.
I need to check some similar home loan (as above) with interest in advance.
See my other thread on home loan – https://www.propertyinvesting.com/forums/getting-technical/finance/4331003
And from duckster link – I see can pay MAX 12 months advance interest.
Actually there are not many 95% loans left, that is why BW force you onto the high rate. You probably can't fix your loan at this LVR as you can only take certain loan products – but maybe you can get in and then change products. I am not up to date with BW at the moment.
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
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