Dec 05

Stamp Duty Must be Reduced

By admin | best investment, Economy, Financial, Investment, Negative Gearing, News, Property Solutions, stamp duty | No Comments

Stamp duty must be reduced

NSW Planning Minister Rob Stokes has recently broken ranks with his Liberal colleagues and suggested that the federal government should make changes to negative gearing. It’s all part of the Sydney ‘affordability’ debate but it is a reduction in stamp duty which is a much better way to improve affordability. Most studies into negative fearing show that its removal is unlikely to drop property prices by any more than half of one percent, yes just 0.5%.

(Please contact us at info@limepropertysolutions.com.au for further information or the chance to discuss this and other issues in the comfort of your own home.

On a very low-priced Sydney home at $550,000, the stamp duty payable to the State Government is over $20,000. Ion the same property, it would likely reduce in value by just $2,750 if negative gearing incentives were removed.

Mr Stokes argued that adding new supply to the market would not make property affordable on its own and suggested changing tax benefits for investors should be changed. In our view, it’s a pity Mr Stokes could not do the arithmetic in the last paragraph and then realise that he and his party can actually do something now to assist affordability rather than doing the political usual of putting it in the ‘too hard’ basket then passing the problem off to someone else. Read more : http://www.domain.com.au/news/stamp-duty-adding-years-to-the-depositsaving-plans-of-sydneys-home-buyers-20161202-gt2jjz/

Property Council of Australia chief of policy and housing Glenn Byres says the $40,000 an average home buyer in Sydney pays on top of their purchase price in stamp duty is a concern. In just four short years, the NSW Government’s stamp duty revenue has doubled from $4 billion to $8 billion. Stamp duty must be reduced if we are to help first home buyers.

If you want to know more about how you can save on stamp duty buying a new property investment contact: info@limepropertysolutions.com.au

Nov 02

0

Banks are destroying your land titles

By Hugh Frame | banking, best investment, Financial, Investment, Mortgage, News, Research | No Comments

Banks are destroying your land titles

Last week we had a couple of days hold up with a refinance matter with one of our clients; the reason was that the banks are destroying your land titles and there may be some hicups in going digital!

It is reported today in the business section of the Sydney Morning Herald –

Empty bedrooms? Put your money where your mouth is!

By Hugh Frame | best investment, Economy, Financial, Investment, News, Property Research, Real Estate, Research | No Comments

Empty bedrooms? Put your money where your mouth is!

Apparently Sydney now has 20 years of future housing stock in empty bedrooms? Put your money where your mouth is NSW if you want to utilize more of this ‘space”.

Downsizing is too costly for many older Australians

The first point of this new argument must be defining who has these ‘extra bedrooms”? While some bedrooms in the homes of empty nesters may be empty some nights of the week, many do not have empty bedrooms gathering dust. After years of being cramped with children, it’s a later life treat to own enough space for a study or an area to pursue a hobby. These rooms can also be used as exercise rooms to keep ageing bodies trim. Most are also grandparents who require bedrooms for visiting children and grandchildren; they are perhaps underused but certainly not empty.

(Please contact us at info@limepropertysolutions.com.au for further information or the chance to discuss this and other issues in the comfort of your own home)

It’s also time to review the massive disincentives placed on older Australians to downsize. Many empty nesters will never consider downsizing because the appropriate type of housing is just not being built. Sure, we are constantly being warned about the forthcoming glut of apartments in most of our east-coast city markets, but many older Australians are not prepared to give up their gardens or a small private area where they can allow their ‘fur-children’ some space to run around outside the home. A smaller garden is often an attractive proposition but no garden at all is a deal-breaker. We need more villas and town homes in the established suburbs where the majority of these older Australians currently live.

The financial penalties for retirees downsizing can be enormous. Just imagine, an older retired couple in a slightly above average (larger) home worth $1.5 million. The home sale, including marketing and legal costs will cost them around $30,000. They buy a smaller town house at around $900,000 and they say goodbye to another $40,000 in stamp duty, another $2000 on legal fees and probably around $10,000 in removal expenses and buying some new furniture that ‘fits” their new surroundings. Basically, they would need to budget around $100,000 of their, (in most cases) diminishing wealth just to move.

Having made the move, they find that they have an additional $400,000 in the bank. This may be enough to stop many of their senior benefits, including pension payments. The argument, of course, is that they don’t need any government funding now but this misses the point that older Australians do love their children and grandchildren and they see it as an essential legacy to leave an inheritance to their family.

It will always be difficult to persuade older people to move out of their family home to free up empty bedrooms for the younger generations but as long as our governments insist on penalising such a move, the bedrooms will stay “empty”. Read more https://goo.gl/jBePqx

If you want to know more about appropriate house type investment contact us at info@limepropertysolutions.com.au.

Oct 10

0

Negative gearing does NOT mean you are making a loss!

By Hugh Frame | best investment, finance, Financial, Investment, Negative Gearing, Properties, Property Research, Uncategorized | No Comments

Negative gearing does NOT mean you are making a loss!

George Cochrane in this week’s money section in the SMH tells us that negative gearing means we are making a loss – what rubbish! – Negative gearing does not mean you are making a loss! Obviously on paper, a tax loss must be showing before we can claim the ‘loss’ against our tax, but very often the astute property investor is making this ‘loss’ through permitted depreciation only, it is not an actual loss in cash but it ‘transfers’ to money in the pocket after tax. By most definitions, money in the pocket is PROFIT not loss!

Negative gearing does not mean you are making a loss. Property can be positively geared after tax

Let’s look at a hypothetical apartment bought in one of Sydney’s fringe around 3 years ago. It doesn’t really matter how many bedrooms it has or in which suburb, but for the sake of the exercise, we’ll assume it was bought brand new!

It cost $600,000 and the investor borrowed another $20,000 on top of the purchase price to help pay the stamp duty and legal costs, so $620,000 is owed and borrowed at an interest rate of 4.3%.

$620,0X 4.3% = $26,660.00 per annum interest

Annual rates = $2000.00

Annual Body Corp = $4000.00

Annual Management fee Inc insurance = $2000.00

Total costs out = $34,660

Less rent @ $570 per week = $29,640

TOTAL ACTUAL ANNUAL LOSS = $5020.00

As well as the cash loss of $5020, we then have to add the first year depreciation on a new apartment. A very conservative figure for this depreciation would be $16,000.

Now we add together the actual loss and the depreciation loss ($5020 + $16,000) giving a total tax loss of $21,020 in the first year. You multiply this figure by your actual tax rate to give a very good idea of what you will be reimbursed by the ATO so assuming you are paying tax at the following rates (excluding the additional Medicare levy which can also be claimed) then we have:-

30% tax bracket – rebate of 30% x 21,020 = $6306

37% tax bracket – rebate of 37% x 21020 = $7,777.40

45% tax bracket – rebate of 45% x 21020 = $9459

In EVERY case the tax rebate is greater than the actual cost of holding the property. In Every Case, the owner of the investment is in a stronger cash flow position because they bought the property. THEN we look at the close to 25% – 30% market growth in apartments in Sydney over the last 3 years giving capital growth profit on the $600,000 of (600,000 x 25%) = $150,000 profit before CGT!

In summary, over 3 years on a 37% tax bracket you would be around $23,000 better off in your daily cash and around $150,000 better off in asset!

So keep this in mind if you read the following article which explains that negative gearing means you are making a loss! Negative gearing does NOT mean you are making a loss! Read more here: https://goo.gl/iJX5Ow

Oct 05

0

Guide to buying property with your partner

By Hugh Frame | best investment, finance, Financial, Investment, Property Solutions, Real Estate | No Comments

Guide to buying property with your partner

Today we have two very good articles which offer a guide to buying property with your partner and many other financial issues that are so often overlooked or completely ignored when two people decide to live together.

I have lost count of the number of couples I have worked with who tell me they are buying an investment property but ‘it has nothing to do with my partner, we keep our financial lives completely separate”.

It’s Spring again and love is in the air so it’s maybe a great time to sit down with your significant other and sort out some problems you may face if you decide to go your separate ways at some point in the future. Probably the two most important issues to recognise are:

If you have been living together for two years or more, then under Australian law you will be treated in the same way as a married couple.
Understanding point 1 above, you should try to steer clear of potential sexually transmitted debt.

Moving in together with a partner can triggers unexpected tax and financial consequences that are not all bad as there can also be unexpected financial gains from living together. Read here: https://goo.gl/ktYEYg

Relationship Australia research has found that disagreements over money are a stronger predictor of divorce than other commonly cited causes of marital disagreements.

Among other things, the 2015 online survey by Relationships Australia found 7 out of 10 couples said money causes tension in their relationships

A lot of people think that a pre-nuptial agreement is something that can only be done before an actual wedding but it makes a lot of sense to organise a pre-nuptial agreement before you move in with somebody. While it may be easy to keep separate bank accounts, what about the money your partner owes to the Bank? Half could easily become yours! Or what about your superannuation or even the inheritance from your parents that went towards paying off the house you both own or maybe its sitting in your long-term deposit or share portfolio; it may only be half yours!

There are other issues that can immediately affect you for good or for bad and they are all worth checking out. Make sure you do your guide to buying property with your partner. Here is a small list but further information on how they affect you can be found on the above link and below..

Medicare levy surcharge
Private health insurance rebate
Businesses and structures

Find out more at: https://goo.gl/pxcLUO

Sep 26

0

Parents who help to buy investment property at no cost!

By Hugh Frame | best investment, Financial, Home Loans, Market, Mortgage, Property Research | No Comments

Parents who help to buy investment property at no cost!

More and more we are coming across parents who help to buy investment property at no cost. If it’s not a first property investment, then sometimes it is a first home buyer getting that extra assistance from mum and dad – and it costs the parents nothing!

The big risk the parents do take is that the children are not trustworthy or that something happens in the children’s work and they are unable to support a mortgage with a lower income. However, most risk can be covered by insurance.

So how does this all work? Simply, the parents become the guarantor for the loan. A guarantor undertakes to pay another person’s loan should they be unable to. Most lenders give home-buyers who do not have a big enough deposit the option to have someone guarantee the loan. With some available loans, the deposit for a new property is held against the value of the guarantor’s home meaning that NO cash deposit is necessary and NO mortgage insurance is payable as the new property is secured against the parent’s home.

If advice was sought before entering into such a contract, it would probably be suggested that the borrowers ensure full risk coverage through appropriate insurances. Today, this could even cover the risk of a borrower being made redundant. Exposure for the guarantor can also be limited and in many cases after $50,000- $60,000 is paid-off the mortgage, or the property grows by that value, the guarantors can be removed by the lender as the guarantor of the loan.

The guarantors (mum and dad) are putting their home at some risk for the sake of their children. What they are giving their children is absolute trust in that they will do the right thing and stick to the terms and conditions of their loan. Mum and dad are not actually putting their hands in their pockets and giving funds to help the children up on to the first rung of the property ladder. It’s a great way for parents who help to buy investment property at no cost to them. Lime Property Solutions can place you with brokers who can fully assist in the loan process. Read more: http://www.smh.com.au/money/-grlrgz.html

Aug 16

0

Tax savings on property investment

By Hugh Frame | best investment, finance, Financial, Negative Gearing, Properties | No Comments

Tax savings on property investment.

Most property investors are aware of the substantial tax savings on property investment that can be legally claimed against the costs of holding an investment property. This is the time of year when most property investors are reconciling their expenses on investment property to send to their accountants in order to receive the substantial tax refund they are probably now due.

It’s also the time of year that the Australian Tax Office issues statements about the type of deductions they will not consider and also deductions that are sometimes claimed and will not only be refused but may also result in fines! You can read more about this below.

It is timely to remind current property investors that they should also have tax variations in place for this financial year. Too often we come across clients who are finding their new investment property is eating into their monthly cash flow and finding that the investment property they now have is affecting their lifestyle. To be ‘loosing’ or spending an ‘extra’ maybe as much as $1000 per month on an investment can drain resources! This ‘loss’ is then magically returned in the form of a large tax reimbursement of around $14,000 come August or September after submitting their annual tax return. Of course it’s great to get this lump sum but better to get the extra $1000 or so each month in your pay packet rather than having to wait 12 months to claim it back. This is what a TAX VARIATION can do for you and it is highly recommended that you have your accountant put one in place for you now if you haven’t already done this.

The list of the top 5 dodgiest deductions became claimed this year are described as,

Transportation of ‘bulky goods’ that can be stored at work
Holiday travel that is not work-related
Fake attendance at a ‘work’ conference
Car-related travel that there is no proof of
Rental deductions with no valid basis

Basically if you don’t own an investment property, and you want to know more abouit tax savings on property investment, have a look at our FAQ’s – “What is negative gearing and how does it work” click here https://propertyinvest.co/property-investment-frequently-asked-questions-faqs/

For more information on dodgy deductions, read more: http://goo.gl/q833rr

Aug 02

1

Tax minimisation and tax avoidance

By Hugh Frame | best investment, Economy, Financial, Negative Gearing, Uncategorized | No Comments

Tax minimisation and tax avoidance

It’s that time of the year again when we go to see our account and sort out our tax for the previous financial year 2015-2016, it’s important we do all that’s possible to look at tax minimisation while keeping in mind that tax avoidance is a serious offence!

So what’s the difference between tax minimisation and tax avoidance? It’s best this question is answered by a qualified tax agent and it is very highly recommended you speak to your own tax advisor about this, but basically tax minimisation is a perfectly legal way of reducing tax through genuine expenses while tax avoidance is just as the name suggests, finding ways of not paying tax which is legally due to the Australian Tax Office.

I find it very difficult to discuss tax minimisation without mentioning the late Kerry Packer, who famously said,

“I don’t know anybody that doesn’t minimise their tax … Of course I’m minimising my tax. If anybody in this country doesn’t minimise their tax they want their head read. As a government I can tell you you’re not spending it that well that we should be paying extra“.

One of the most efficient ways of minimising tax, of course, is to purchase an investment property. As we mentioned in yesterday’s blog, with the exceptionally low interest rates we now have and the high possibility of finding a relatively high yielding, well located investment property, it is highly likely that your new property investment will be more than fully [paid for by your tenant and the tax you can save through legal tax minimisation strategies such as negative gearing.

Just as a reminder for those who have already bought a property investment, you should have your tax variation completed by now for financial year 2016-17 to ensure that you get the ‘saved’ tax in your fortnightly pay packet now rather than waiting until the end of the tax year to claim it all back.

For more information about the difference between tax minimisation and tax avoidance read: http://www.smh.com.au/money/-gqb4w9.html

Jul 06

0

Are you ready for your next property investment?

By Hugh Frame | banking, finance, Financial, Home Loans, News | No Comments

Are you ready for your next property investment?

It’s a new financial year, you really need some tax relief, you want to start accumulating wealth for your future and you have decided to buy another investment property, but are you ready for your next property investment?

The first thing you should probably do is test out your borrowing capacity and ensure you have the funds to go ahead to make sure you are ready for your next property investment.

It’s a good idea to check your credit rating before applying for your next property investment loan

It is surprising that only 29% of Australians have ever checked their credit rating and yet it is possible to do this free of charge once every year.

It is also surprising, as we have seen with a couple of clients in the last year, that your credit rating may be a lot worse than you imagined, simply because you have been managing your finances too well! Your credit rating can be affected simply by considering a change to loans, looking for new loans and switching loan providers. It would seem that the credit rating system views people who are often changing loan providers or credit cards as ‘high risk’ as they may be constantly changing because they are under financial presure to pay their bills. Very often people are changing just to manage their financial position better and have had no problems or late payments at all and yet their credit score is being lowered.

It is also surprising for some to find out that a small problem they had a few years ago and which has been forgotten about after it was cleared up, still have this period reflected in their credit rating.

Sylvia Pennington of the SMH gives us five tips to ensure we use this new financial year to clear up any problems we may have with credit rating agencies. It’s always possible that something may be on your credit record that should not be there and you can appeal. So follow the tips below and ensure that you are ready to buy that next investment property.

Tips for a glowing report

Credit reporting agencies, including Veda, Dun and Bradstreet and Experian, offer consumers a free copy of their credit report every year. Here are some tips to keep yours healthy.

Check your record for defaults and pay any outstanding debts.
If personal data or debts are incorrectly listed, contact the credit agency and the creditor to have them amended or removed.
Establish direct debits to ensure your bills and loan repayments are on time.
Don’t make unnecessary applications for credit – too many inquiries in a short period can indicate you’re in financial distress and send your credit score south.
Prevent debts becoming defaults by alerting creditors early if you’re having trouble making payments.

Investment property –how much can I borrow

By Hugh Frame | banking, best investment, Economy, Financial, Investment, Negative Gearing, News | No Comments

Investment property –how much can I borrow?

Investment property –how much can I borrow? The answer to the question, “ Investment property –how much can I borrow“, seems to change month by month and sometimes week by week but currently, in a nutshell, the answer is an awful lot!

The critical changes in the mortgage market over 2015 with the introduction of tougher bank lending rules for property investors now seem to be being reversed. Most of the big banks decided they would not lend for property investment at all if mortgage insurance was necessary, so in most cases, the property investor had to be in a position to borrow only 80% of the value of the new investment property. At the same time, the amount they were prepared to lend as a ratio of income was also decreased quite substantially making it much more difficult for buyers to fund an investment property.

Investment property –how much can I borrow. Investment property borrowing capacity seems to vary weekly

Now, we are told, some lenders will write loans that were 9.4 times a property investor’s income and we are also seeing banks like Westpac now prepared to lend up to 90% of the value for property investment. In a few cases, some lenders have not dropped their Loan to Value ratio for property investment below their ‘normal’ 95% LVR.

So for a new Investment property –how much can I borrow today? Australian banks have always allowed property investors to borrow a significantly larger multiple of their income than owner-occupiers, despite a crackdown on lending to landlords. This has just been confirmed by some new research by Macquarie. This outcome should not come as a surprise to anyone although the tone of today’s media article suggesting that more tightening in mortgage lending is likely suggests otherwise.

Why would any sane lender offer more to an owner/occupier than a property investor? The lender is obviously going to include some, if not all of the property investment income in assessing a loan as well as, in most cases, some of the tax advantages the property investor will be entitled to through negative gearing. This obviously means that the property investor can afford to borrow substantially more on than an owner/occupier who will have to find the funds to pay the entire due mortgage with their after-tax income!

The research also points out that banks were offering deeper discounts of up to 1.4 percentage points off their standard variable mortgage rates, a trend that is likely to squeeze bank profit margins; something that will probably not give many of us sleepless nights!

Financial

Stamp Duty Must be Reduced

Banks are destroying your land titles

Empty bedrooms? Put your money where your mouth is!

Negative gearing does NOT mean you are making a loss!

Guide to buying property with your partner

Parents who help to buy investment property at no cost!

Tax savings on property investment

Tax minimisation and tax avoidance

Tax minimisation and tax avoidance

For more information about the difference between tax minimisation and tax avoidance read: http://www.smh.com.au/money/-gqb4w9.html

Are you ready for your next property investment?

Investment property –how much can I borrow

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