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

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

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 11

0

Property prices still continue to rise

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

Property prices still continue to rise

If you have been keeping an eye on the value of your property investment portfolio over the last quarter then you’d be quite happy to note that unlike the first quarter of this year, property prices still continue to rise!

It appears that a very long general election, cold and wet weather and the effects of ‘brexit’ were not enough to stop property prices continue to rise over most of our capital cities.

CoreLogic’s monthly house price index indicates that most of the loss that we witnessed in Sydney over the first quarter has been gained again with house price growth of 6.8% in Sydney and about half that in Melbourne.

The further interest in what are already unaffordable markets is being attributed to the interest rate cut in May which gave owner occupiers and property investors a little more encouragement to spend more again on property. Another factor that supposedly increased property investment activity was the pre-election fear of losing out on negative gearing if Mr Shorten had ended up forming our new Government.

Domain Group chief economist Andrew Wilson said the Sydney and Melbourne results were not surprising, particularly after a month of strong auction clearance rates,

“Auction clearance rates increased in every capital city [in June] except for Melbourne, which was flat,” Wilson said.

“We would expect to see house price growth following these results.”

Sydney’s auction clearance rate increased to 71.7 per cent over June, compared with 69.2 per cent in May, Domain Group data shows. One year ago, the auction clearance rate was above 80 per cent.

It is probably worth considering if auction clearance rates in the high 60’s and low 70’s are particularly good, especially when we are looking at a hugely reduced number of auctions in the first place, so maybe these results are a little more surprising than we expected?

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!

Property investment surge in Sydney

By Hugh Frame | Auction, best investment, Economy, Investment, Negative Gearing, Property Research | No Comments

Property investment surge in Sydney

On May 20^th the blog was about a property investment surge in Sydney according to auction clearance results and a possible change to negative gearing laws.

Auction clearance rates decline dramatically

According to Domain, we had a huge number of investors rushing to get in before Mr Shorten changes the rules in 2 year’s time. Just a couple of days later, the same organisation published an article supporting this supposed “huge increase in property investors” entitled FOMO, (short for Fear of Missing Out), where they stated:

“Forget about John Symond’s warning of “Armageddon” for house prices if negative gearing is abolished. At least in the short term, the artificial deadline on negative gearing is likely to push up Sydney property prices, regardless of who wins the election.

Last weekend’s boom-like 80 per cent auction clearance rate has experts wondering if it’s set to be repeated this weekend, indicating the boom is back. Labor has set a termination date of July 1 next year for the policy that delivers tax breaks to investors. After that, only buyers of new properties will be able to negatively gear.”

This ‘boom” was based on little else but the auction clearance rates which were based on about half the number of auctions that took place at this time last year when the real Sydney price boom was entering its last quarter.

It’s time we all have to accept as property investors that for the time being, and probably the next few years, the price rises in investment property in the city of Sydney are over.

From the very positive headlines of two weeks ago, we now read, “ Sydney recorded a clearance rate of 72.8 per cent on Saturday a far cry from the remarkable 80.3 per cent rate recorded two weeks ago. Sydney hosted higher numbers of auctions on the weekend with 599 home listed to go under the hammer compared to 573 the previous weekend. Auction listings however continue to track well below the levels of last autumn with 858 auctions conducted on the same weekend last year.”

So, in summary, if the freak clearance figures we saw a couple of weeks ago were due to a huge surge of property investors who were frightened of missing out because of small changes to negative gearing in two years time if Labor win the election, then the results of Saturday must be interpreted as “Sydney Property investment buyers now convinced Mr Turnbull will win next election”. All based on Auction clearance results of course…. I don’t think so!

Read full story: http://goo.gl/LwtyYN

May 23

0

Advantages of renting over buying a home

By Hugh Frame | best investment, Financial, Investment, Negative Gearing, Properties, Property Research, Real Estate, rent | No Comments

Advantages of renting over buying a home

This little blog seems appropriate following the last blog but this time we look at the advantages of renting over buying a home.

More options in property investment and renting than buying your own home.

For many years, Lime Property Solutions has assisted young couples in particular build substantial equity in property through the relatively new coined phrase “rentvesting”.

In the same weekend, a ‘Domain” article tells us First-home buyers are turning their back on the Great Australian Dream of having their own home to live in and are instead increasingly opting for an investment property first. Described as ‘rentvestors’, a third of investors in 2016 were first-time buyers who had not yet bought their own home, a Mortgage Choice survey found.

So in today’s blog we’ve given you two separate articles to go to on the same subject. As we’ve always said, “Rent money is NOT dead money as long as you take a position in the housing market.”

So if you crave freedom and options but are fighting against the need to put down roots and buy your own home, here are a few reasons why you might consider an alternative.

Negative Gearing
Spreading the risk
Liquefying our assets on retirement
Rent can be cheaper
Freedom to move

See more here: http://goo.gl/Yit4lg and also http://goo.gl/1iFYxM

May 23

0

Generation Rent: How do you get enough income to retire?

By Hugh Frame | best investment, Economy, Financial, Investment, Negative Gearing, rent, Research | No Comments

Generation Rent: How do you retire?

A very interesting article in this weekend, “Generation Rent: never buying a property will mean saving more for retirement or the big question it alludes to Generation Rent: How do you retire?

The article correctly points out that Generation Rent will retire into an aged pension and superannuation system that was not set up for people who rent. Recent figures released also point to the fact that one third of all private renters are now classed as ‘long-term’ this figure rising from just one quarter twenty years ago.

Generation Rent faces something no other generation has collectively experienced before – renting in retirement

Terry Burke from Swinburne University states, “Income support systems are premised on outright [home] ownership and therefore Australian pensions tend to be much lower than equivalent countries,”

In Sydney, if you live in the city’s cheapest suburb, Marsden Park, and you retire owning your own average-priced home, you will still be $360,000 better off than a renter. Of course, we have seen the median price of property in Sydney exceed $1 million for a short time so it would stand to reason that most renters will never accumulate this amount of funds without being in the property market.

The Association of Superannuation Funds of Australia data estimates that for someone to afford a comfortable retirement at 65, a single would need $545,000 and a couple would need $645,000, REST Industry Super chief operating officer Andrew Howard said.

Financial experts say it is possible, although challenging, for lifelong renters to comfortably cross the finish line into retirement.

After income dries up, a larger nest egg is needed and savings from not having a mortgage need smart investment. The key would be to invest the difference rather than simply saving, so why not contact Lime now and learn how easy it can be to be a rent-investor? http://goo.gl/1fvwnf

May 17

0

Negative Gearing proposed change by Labor would be a mistake

By Hugh Frame | best investment, Economy, Home Loans, Investment, Negative Gearing, News, Property Research, Real Estate | No Comments

Negative Gearing proposed change by Labor would be a mistake

Negative Gearing proposed change by Labor would be a mistake according to John Symond of Aussie Home Loans fame.

Aussie John has been taking it on the chin as he is being seen as having done a u-turn on the issue. Basically this whole story is based on the fact that no one in this democracy who is in the public eye should ever be permitted to change their mind. Aussie John has just committed this terrible sin!

Negative Gearing Proposed change by Labor would be a mistake – Aussie John

When we look at the context of Mr Symond’ apparent u-turn, it makes the circumstances of his turn around even more understandable. Placed on a panel on ABC the entertainment programme Q and A way back in 2013, Mr Symond was asked by a single mother in Perth about what could be done with negative gearing to assist people like single mother’s get on to the property ladder? Perth was having a long interrupted run in the mining boom and house prices in Perth had gone up by over 200% in the previous 10 years. “Aussie John” did suggest in a sympathetic manner that maybe a look at negative gearing and all of the Australian taxation system may, in fact, help.

Three years later, mining boom well over, an Australian Economy not doing too badly after our mining boom thanks mainly to our hugely increased residential construction industry, the hot topic of the day being negative gearing and the effect it may have on the Australian property market if changed and a leading figure in our residential lending area is asked to comment on the topic ……. plenty of time to think and analyse in a pretty different financial environment from 3 years ago and HE CHANGES HIS MIND!

Is this really a story of deceit and unreliability? Or maybe it’s just a story of an experienced property person understanding a changing market – after all, that’s how he really made his millions, understanding a dynamic market! He is not an elected representative promising not to introduce a carbon tax or promising to make no cuts to the ABC budget, he’s a highly successful and clever property guy who really understands what slight changes in our economy can do to a very dynamic market place.

Mr Shorten, instead of criticising this man for supporting one political party over another, maybe it would be better to listen to what he has to say and act on his advice.

Negative Gearing

Stamp Duty Must be Reduced

Negative gearing does NOT mean you are making a loss!

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

Property prices still continue to rise

Investment property –how much can I borrow

Property investment surge in Sydney

Advantages of renting over buying a home

Generation Rent: How do you get enough income to retire?

Negative Gearing proposed change by Labor would be a mistake

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