- KunzParticipant@kunzJoin Date: 2015Post Count: 2
I’d like some advice on the following situation:
I currently have an IP which for the most recent tax return, was slightly positve (as a result of savings I have in the offset account). The tenants are moving out so I am considering whether I should move into this property (which has always been an investment for the last 2 years) or if I should re-let out and look at renting myself. I know if I move into the IP and turn it into a PPOR, I will lose my first home buyers and the 6 year rule will apply however I don’t have an intention on selling down the track. Also, if I do choose to re-let the property out, I’m thinking I should move the savings I have in the offset to maximise the negative-gearing benefit although not sure where I should move these savings to.
If anyone has some feedback/advice on the tax/cost implications of moving into the IP vs renting and what to do with the savings in my offset, I’d be greatly appreciative. ThanksJamie MooreParticipant@jamie-mJoin Date: 2010Post Count: 5,069
It’s as much a personal choice as it is a financial one.
FHB benefits are usually restricted to “new” properties – so you may not obtain those benefits in the future if you’re considering purchasing an established property.
Offset makes sense for keeping that money. You could move it into a higher interest account….but you’d pay tax on that interest.
Jamie[email protected]Participant@spartantomJoin Date: 2015Post Count: 18
Regarding moving the money out of the offset account, you’ll need to weigh up where the funds will be better utilised.
Personally I find that too many people get caught up in trying to preserve the negative gearing position. Sure, negative gearing is a great tax benefit but this shouldn’t be an end goal. It’s a tool to use as part of your overall investing strategy rather than the focus of the strategy.
Look at your other options, canvass some opinions here when you have $$$ figures, talk with your accountant and then make the call.PeteParticipant@pjewittJoin Date: 2015Post Count: 50
Negative gearing is a great aid/tool to help you achieve your investment goals, but the goal is not to make sure you keep making a loss each year on your IP. Sure, you get a bigger tax return with negative gearing, but what you get back in your tax return is only a portion of what you’ve forked out throughout the year. As an example, if your marginal rate of tax is 37%, then for every dollar you pay out as a loss throughout the year, you’re only getting 37c back. Not such a great return on your money when you look at it like that. I consider the 37c I get back as a bonus only and not a reason to stay in negative gearing territory.
You really should rent the investment property for positive cash flow to support your main job! And rent yourself…. Let the ip grow in equity. Then buy another ip 2 to 3 years later…. Once both properties equities are high enough say after 5 years for each then sell both to buy one property you wish live in and own with full equity ownership. Why let the banks get richer?
Just make sure you don’t lose your job !KunzParticipant@kunzJoin Date: 2015Post Count: 2
Thanks for the feedback. Seems the focus should be more on the long term strategy and lifestyle choice and then assess the financial dynamics accordingly (rather than basing my lifestyle choices around the financials). Cheers