澳洲Australia property Taxed on +ve cashflow profit from IPs? |


在澳大利亚 I need some advice regarding a property purchase. Property - semi-detached house Bedrooms - 2 Condition - average needs internal reno to modernise Street - one of the best in suburb Location - excellent Close to schools - yes Transport - 50m The pool at of an IP needs to be resurfaced (or so the pool doctor says), the cost was estimated to be $10K ($10,000), after recoverying from my impresssion of a cat coughing up a fur ball, it just seems far too much. Its just a standard poo


Just a quick one.

If my IP turns say $5k in positive cashflow per year, which gets piled up into the property's offset account, is that considered "personal income" and therefore is personal income tax payable on that amount at my normal tax rate??

Cheers  

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recruit2 said: ↑
Just a quick one.

If my IP turns say $5k in positive cashflow per year, which gets piled up into the property's offset account, is that considered "personal income" and therefore is personal income tax payable on that amount at my normal tax rate??

CheersClick to expand...
What do you consider depreciation to be?  

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Assuming it's held in your personal name, a positively geared IP is just like any other type of ordinary income for tax purposes - the assessable income minus allowable deductions (including deprecation) will form part of your taxable income within a financial year and taxed at your marginal rate.  

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Net taxable income and cashflow are not the same thing.  

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If, after all expenses (including depreciation) you are left with profit, then of course it is considered income and will be taxed accordingly.  

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Not sure yet Alex sorry because I am still living OS atm but am getting a quantity surveyor report done as soon as I get home in December. But it should be pretty good, 3 yr old 550k townhouse.

So bottom line, of course I am going to get taxed on anything I'm making over and above the cost of hanging onto the property. Thx for clarifying skater.

Scenario:
- Already in a high tax bracket.
- If I hold cashflow positive property, the last thing I want to do is to give away even more tax to the tax man.

So what would the standard thing be to do here..? Buy another slightly negatively geared property to get the net cashflow back down to 0 therefore not paying any more tax and aim to build the wealth over time from growth in equity etc? And on the cycle goes..  

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Tough question recruit.

+ve gearing (as opposed to +ve cashflow) is good, but you then end up paying tax for the privilege.

-ve gearing means the property costs you money, but you get a tax refund for doing so.

I figure the best bet in the accumulation/growth phase with respect to residential property is neutral gearing.

When you need the ''+ve'' income eventually, you'll have to deal with the tax consquences then...  

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recruit2 said: ↑
So what would the standard thing be to do here..? Buy another slightly negatively geared property to get the net cashflow back down to 0 therefore not paying any more tax and aim to build the wealth over time from growth in equity etc? And on the cycle goes..Click to expand...
Depends on your strategy, no investment should ever be based simply on its tax effectiveness - but on the underlying investment itself. Maybe you need to have a think about your goals and what you're trying to achieve, then pick a type of property that will assist in meeting them?

From what you've described it doesn't sound like you are currently investing for positive cashflow, and if so maybe some high growth properties would be good to add to the mix to provide you with long term equity growth? Don't automatically think 'negative gearing' because this shouldn't be your first consideration, think 'high growth property' however by it's very nature this type of property tends to be negatively geared, in the early years anyway.  

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recruit2 said: ↑
Just a quick one.

If my IP turns say $5k in positive cashflow per year,Click to expand...
recruit2 said: ↑
am getting a quantity surveyor report done as soon as I get home in December. But it should be pretty good, 3 yr old 550k townhouse.

.Click to expand...
OK, while I am not a Quantity Surveyor, and I have not seen your IP, I think I can quite confidently say that if your IP is only three years old that you should get more than enough depreciation to cover the $5k positive cashflow.  

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skater said: ↑
OK, while I am not a Quantity Surveyor, and I have not seen your IP, I think I can quite confidently say that if your IP is only three years old that you should get more than enough depreciation to cover the $5k positive cashflow.Click to expand...
Hmm. Example:
- Property makes $5k positive cash flow.
- QS report says depreciation was $7k.
- So I've gone backwards on paper by $2k.
- So I don't pay any tax on the $5k received throughout the year.
- And I might actually get a bit back?



JIT: Yeah that makes sense and I agree. While you already have a strong income elsewhere outside of property, it does seem silly to burn more through tax.

Ricardo: I look to my business for positive cashflow and that hogs most of my time. I guess I am investing for capital growth. While it is fantastic, I'm probably not that interested in holding 20+ properties and living off all the positive cashflows added up for example.  

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recruit2 said: ↑
- And I might actually get a bit back?



.Click to expand...
Yep! But don't count your chickens before they've hatched. Go get that depreciation report, because it all depends on that. Afterall, we (us, not you) don't know whether your townhouse that is worth $550k is made up of build price $100k & land $450k, or build price $450k & land $100k, or somewhere in the middle.:D  

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skater said: ↑
Yep! But don't count your chickens before they've hatched. Go get that depreciation report, because it all depends on that. Afterall, we (us, not you) don't know whether your townhouse that is worth $550k is made up of build price $100k & land $450k, or build price $450k & land $100k, or somewhere in the middle.:DClick to expand...
Ok yep good call. Yeah itching to get it all done and finalised. Had the best year ever living OS and now absolutely itching to get back into reality and power on. Seems a little weird heh. :p I have so much admin/bank/tax stuff to take care of as soon as I step foot back in oz. Cheers.  

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Paying tax is a good thing, it means you are making money. Just make sure you are claiming all the expenses.  

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