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Episode 126 | Q & A-ccounting with Frank Azzopardi—Tax Deduction, Capital Gains Tax, Land Tax and Aussie Expats

Alright folks! It’s Q & “Accounting” time! Yep, on the couch today we’re talking all things tax! Here to help us wade through the grey area is Frank Azzopardi from our friends (and accountants) at YK Partners. If the name sounds familiar, it’s because Frank joined us back at Episode 48!

So, we’ve received a couch-load of questions about tax lately, and quite the few of you have these questions because you’ve “temporarily departed” overseas—you’re Aussie Expats working in another country, but investing in properties back here. And as you know, this can be quite the pickle for tax purposes!

(The rest of you simply want to know what you can and can’t claim. Fair enough.)

Trying not to number-crunch the neurotransmitters in your brain, here are what B1 & B2 + Frank discuss:

  • Is there a tax-free threshold when you live overseas?
  • What is a Double Tax Agreement and what does it mean for you?
  • How does foreign tax credit work?
  • How do you offset tax loses?
  • Tax Talking, What’s the difference between a PPOR and an IP?
  • Can you claim tax on Lenders Mortgage Insurance (LMI)?
  • What really constitutes “Repair” or “Capital Improvement”?
  • Can you negatively gear a property as an expat?
  • What is the “6 Year Rule” of Capital Gains Tax?
  • Can you avoid Capital Gains Tax?
  • What’s the risk of loan in two people’s names (joint ventures)?
  • What’s the tax cut for your kids when they inherit your property?

 

Some of the helpful resources mentioned today are:

 

And… The questions discussed are:

 

From Andrea

“First of all I am loving the podcasts. I listen to them over and over. Secondly, as an Australian expat, living overseas long term but preferring to invest my money back home in Australia, are you able to do a podcast directed at Aussie expats wanting to invest back home but are not sure how to go about it? If you could talk about it or bring someone in? If you could talk about things Aussie expats need to be aware of ie—the different rules that apply regarding capital gains; tax depreciation; tax credits; services expats can employ to assist with the fact we can’t make a trip every week to attend viewings and sign papers. Having bought 4 places in the last few years, I have not completed my PIPA education yet—I am nervous about giving too much advice. Thanks and keep up the good work. I’ll be ready to buy again soon so will likely be in touch for assistance in this.”

 

From Salim:

“Hi Guys. I listen your podcast regularly and leaning a lot!! I have a question and have been searching for the answer for a while; but no luck so far (asked same questions to few accountants but all of them have different opinions)! I bought an investment property last year in Melbourne in July 2016 (that time I was living and working in Sydney) but very soon, I am moving to Melbourne and am living in my investment property as principal residence.
1. I paid around $7500 as LMI. Can I claim this for tax deduction?
2. Can I offset the interest in my Tax?
Any help would be greatly appreciated!! Look forward for your resonance. Thanks.”

 

From Nick:

“Hi guys! Really enjoy the podcast—you have both helped reshape my approach to property investment and I’m currently in the process of developing an investment strategy that suits the specific circumstances of my partner and I, rather than rushing into the often-scary Sydney market.
We’re a couple currently renting in Sydney with a combined income of over $220,000/year, around $80,000 sitting in the bank, no kids at the moment (but probably will within the next 2 years); and we’d like to get our foot in the door of the property market. One challenge we face is a high likelihood of moving overseas for work within the next 5 years. If we buy as owner/occupiers we’ll be looking at 2 bedroom apartments in the medium-priced suburbs of Sydney – right at the limit of our purchasing means. Should we move overseas for work, my understanding is that we won’t be able to negatively gear the property (since our income tax will be overseas). It does appear that some other countries have negative-gearing policies, although it’s not clear whether losses incurred from overseas investments are eligible and the rules differ from country to country. My feeling is that stretching to buy an apartment in Sydney for ourselves now could force us to sell early if we move overseas and the repayments are strongly outweighing the rental income—not a situation we want to be in.
If we instead look at rent-vesting and aim for a cheaper investment property in a growth location somewhere outside of Sydney, with a path to getting it positively geared in the short-term, this seems like a lower risk strategy that still gets us a start on our journey to a property portfolio. I’m hoping the principles you talk about have sunk in a bit and I’d love to hear if you think I’m on the right track.
I think our situation is quite common for a lot of young professionals. What tips can you give from both a tax and property selection point of view to the many Australians working overseas or planning to work overseas, who still want to invest in the Australian property market and start building a passive income for their futures?

 

From James:

“Hi Ben & Bryce. With the strategy of accumulating 3–5 good capital growth properties and potentially selling 1–2 in the long term future upon retirement, would we not be best to (if possible) move into each property for minimum of 12 months to avoid capital gains tax when the properties are sold? Thanks for such a valuable podcast I always listen to each episode a couple of times a week. Regard, James

 

From Simon:

“Boys. Love the book and am now an avid listener to your podcast each week. I have a land tax question for your next Q&A session that no one can seem to give me a clear cut answer.
My wife and I have a PPOR (Newcastle), as well as one current investment property also in Newcastle. Recently we have just purchased an apartment off the plan which is not due to be completed until late 2018 at the earliest.
Currently all three properties are in both our names—50/50 share.
My question is regarding NSW land tax which the 2017 threshold is approximately $549k. (Lets just say $550k for ease of rounding off)
Does this mean that as a couple we have a combined threshold of $1.1 million or despite having two people owning these properties do we still have to come under the $550k to avoid land tax as a couple?
If the latter is the case, what is the best way to minimise our exposure to paying land tax if we wanted to continue to purchase investment properties in NSW? Should our next purchases be in separate names?
Thanks for your help. Simon.”

 

If you like this podcast: “Q & A-ccounting with Frank Azzopardi—Tax Deduction, Capital Gains Tax, Land Tax and Aussie Expats”, don’t forget to rate us on our iTunes channel (The Property Couch Podcast) and our Facebook page. If you have any questions or ideas, feel free to drop us your thoughts here: New Topics

Episode 117 | Everything You Need To Know About Depreciation Changes – Chat with Bradley Beer, CEO of BMT Tax Depreciation

We’ve got Bradley Beer, CEO of BMT Tax Depreciation on the podcast today! Now, some of you might remember Bradley back in Episode 10 where we talked about what is a tax depreciation schedule, how it works and if all property investors should have one done.

For today’s episode, however, we will be relating back to Episode 115 where we chat about the impact of the recently released Federal Budget had on property investors, focusing specifically on the depreciation changes. So here are the topics that they touched on today:

  • Exactly what part of the depreciation deductions are affected by the proposed changes?
  • Are capital works deductions still available to be claimed at 2.5% for 40 years?
  • What is the significance of 7:30 pm AEST on the 9th of May 2017?
  • Will they be looking at the contract date or settlement date?
  • Do the proposed changes affects tax depreciation schedule that was previously submitted?
  • How will this impact investor’s cash flows and is there a difference between new vs old property?
  • What is the logic behind the changes on investor’s travel expenses?

 

Free Resources:

 

 

If you like this podcast: “Everything You Need To Know About Depreciation Changes – Chat with Bradley Beer, Managing Director of BMT Tax Depreciation”, don’t forget to rate us on our iTunes channel (The Property Couch Podcast) and our Facebook page. If you have any questions or ideas, feel free to drop us your thoughts here: http://tpcaustralia.wpengine.com/topics/

Episode 115 | What Does The 2017 Federal Budget Mean To The Property Market?

What a week! Apologies for the podcast’s downtown earlier this week and thank you to those of you who wrote in to us. We had a system update and things didn’t quite work out as we wanted them to be. That aside, the 2017 Federal Budget has been released just a couple of days ago. So let’s talk about that.

There were a few proposals relating to the affordability issue and a couple more that aims at the property investors pool. But overall, this was not an overly exciting budget. It was a conservative one. Nonetheless, what impact will if have on property owners and the Australian Property Market in general. Some of the issues that Bryce and Ben discussed in today’s episode are:

  • The proposed changes to depreciation deductions for plant and equipment
  • Capital Gains Tax exemption for foreign and temporary tax residents
  • Investors’ travel expenses claims
  • The implementation of First Home Super Saver Scheme and is it a good idea
  • The expanded audit on overseas investors

If you would like to understand more about the 2017 Federal Budget, please check out this link.

We’ve also answered a few questions from:

  • Joel on the First Home Super Saver Scheme: Hi property couch crew! Since the website is down ill throw my question for the next Q&A here. A good one of the younger generation first home buyers as well as parents. My question relates to the announcement of the first home buyers saving scheme announced in the budget, with the tax break through superannuation. Being someone who has been taught in uni and at home by my parents not to touch my super and add extra payments where possible, is this scheme of accessing it for a house deposit reasonable? I see the tax break being a great idea but opening the idea of people taking there super to buy a house they cant save for rings alarm bells for me. Do i have the correct understanding of it all? Would you recommend another way?
  • Leo on property valuation: Hi Ben & Bryce – (and the Stig!), I cannot thank you enough for the endless amount of value that you provide for your listeners. Your content is conversational and easy to understand even for a first-time investor like myself.
    I have a suggestion that may also benefit other listeners. I have recently purchased my first investment at 23 years old. It is an existing (3 bed, brick and tile) property and I am in the process of planning a cosmetic renovation. My question is – When refinancing against an existing asset, do all property valuers have a set agenda when valuing your property? Since all valuers will have a different opinion on price, is there a similar set of factors they look at? (i.e Condition of kitchen, bathroom, flooring etc) – going on from this, Is there ways you can make your property more appealing to a valuer in order to gain a higher valuation to leverage onto the next investment? Thanks alot guys – I appreciate your work!
  • Derek on bookkeeping for investors: Something that isn’t as widely discussed in the field of real estate is book keeping. You guys mention the need to spend 10 hours or so per year to review each property in a portfolio. Can you dive into greater detail as to what exactly this entails? What sort of information do we need to keep track of and is that done through spreadsheets or specific software?

 

If you like this episode (What Does The 2017 Federal Budget Mean To The Property Market?), don’t forget to rate us on our iTunes channel (The Property Couch Podcast) and our Facebook page. Any questions or ideas? Feel free to drop us your thoughts here: http://tpcaustralia.wpengine.com/topics/

Live Questions and Answer Chat on Property Investing – June 2016

The Property Couch podcast is all about helping others avoid making bad property investment mistakes and sharing the insiders guide to property investing. That is why on the 29th of June 2016, Bryce and Ben decides to hold a Live Questions and Answers Chat on Property Investing so that we can interact directly with our fellow listeners. Thank you to all of you who have joined in and if you would like to watch a replay of this, here’s a recording on Youtube:

List of questions Answered:

  1. Will Sederino: My question is about claiming depreciation on an existing property that has been renovated. We are about to purchase a property (using Empower Wealth’s Buyer Agents) that has recently been renovated by the previous owner and wonder whether we can claim depreciation on this renovation even though it was not us that completed it. My gut feel is that we would be able to? Is this correct?
  2. Mitch Scholard: G’day fellas, wondering your thoughts on which capital city will see the best capital growth over the next 5 years.
  3. Luke Stirton: Does development and renovation provide the secret to accelerated gains in today’s increasingly harder market to get ahead?
  4. Angela Cerasi: Hi guys, I am new to property investing and am currently in my research phase. Have listened to all your podcasts and enjoyed them immensely! I have 2 questions. (1) If a potential investment property is to have owner occupier appeal, then won’t you be competing with owner/occupiers when it comes to buying? From what I understand this means you could be competing with emotional buyers who could push the price up. I don’t think renovating is for me, so I would be buying a place that would be pretty much ready to be lived in by tenants. I of course want to find an area which is gentrifying, but wouldn’t owner/occupiers who are looking for a great buy also be looking for this too? (2) If a buyers agent takes a fixed fee, how much time would they generally dedicate to finding your property? Do you come to them with the city/suburb in mind or do they come to you with those details based on your personal situation? Do they keep looking for you until a property is successfully purchased? I appreciate that all buyer’s agents would differ but maybe you can give me an idea of how it works?”
  5. Maria Li: Can you do a PAYG withholding variation the first year that you own investment property (based on projected cash flows) or do you have to wait a year so that you can base future withholding variations on the previous year?
  6. Leisa Caines: Hi Bryce & Ben, love the podcast & your book. Hear you talk about finding an investment savvy mortgage broker but where do you find one? I’m in North west area in Sydney
  7. Brad McCreadie: Would you buy now or wait to see what happens to apartment prices in Briz. Looking at a 2 bedroom as owner occupy initially but then to use as investment.
  8. Karl Frank: Hi Guys. What will be the impact to the housing market if Labour win the next election and implement their changes to the Capital Gains Tax as it relates to investment properties?
  9. Mark Rogal: If Labour win the election, negative gearing and CGT changes won’t kick in until mid-2017. In your opinion, what is the most likely scenario for prices of established homes between now and July 2017? Thanks for the great insights! Cheers!
  10. George Kallinikos: I was wondering what is a suitable time frame is to wait it out during a period of experiencing little to no growth. I have owned a one bedroom apartment in a Melbourne blue chip location of Hawthorn since 2008 and it has barely kept up with inflation. This has left me disillusioned during a period where Melbourne overall has seen incredible growth. I understand exit / repurchase costs but also realise that the opportunity cost of this investment has been quite high. What are your thoughts?
  11. Bradden Mitchell: GDay Bryce & Ben. Does an investment grade property have to be over $500K ?
  12. Jack Killalea: If there is a significant price correction in the CBD apartment market over the next 2-3 years, will these apartments become potentially good investments or because they lack scarcity they will always be fundamentally not investment grade?
  13. Geoff Smith: Hey guys just a quick question, how does it work with using parents equity from their homes. How does the loan get structured or would it be used as a line of credit against there property?
  14. Graeme Ash: Hello Couchers, Great Show 🙂 Quick question – with banks only lending 60% for loans, do you think it is better to go for the biggest, blue chip, investment grade, growth asset you can afford using all your super or go for a cheaper property so your 40% does wipe you out and you can start saving for property 2.
  15. Felix Tjandrawibawa: What’s the best way to estimate capital growth for a suburb? Are you guys looking at historical growth (if so – how long do you guys look for?)?
  16. Rachel Hubbard: Hey guys. I’m now in a position to buy my next investment property. However my financial goal is to pay off my ppor in the next 5-10 years. Given that property investment is a long term strategy, do you suggest buying another investment property in an attempt to gain equity and sell in 5-10 years to pay off my ppor? Or given the high costs involved in buying/selling, should I look to invest in other ways to achieve this goal?
  17. Alex Hill: Are all house and land packages dud investments? In 2013 I bought land in North Lakes QLD and built a lowest house. I spent about $50K over median price for the area, trying to maintain some owner-occupier resale appeal. It’s currently cash flow neutral but I’m concerned there will never be any growth, and I’ll now struggle to accumulate a deposit for a second investment property. What are your thoughts?
  18. Amy Hambin: When building an investment property is yield calculated on land and construction costs or the first valuation on completion?
  19. Daniel Stocks: Hi guys, do you often come across clients who’s properties come in at less than purchase price when applying for finance?
  20. Sam Hockey: Hey guys, am I better off looking at an investment property towards the upper end of my lending capacity ($800k) to get into the better areas of Brisbane or looking further out for something around $400k to setup my next investment property purchase sooner? Love the podcast I’ve just finished it for the 2nd time around!!
  21. Richard Bristoe: Hi Bryce and Ben, I just want to ask what are your thoughts on Brexit, and how it will affect the Australian property market in the short and long term?
  22. Mitch Scholard: Would love your thoughts on the Sunshine Coast, I feel like it has great owner occupier appeal but not sure it has the income to keep property prices increasing.
  23. Daniel Stocks: If looking for properties interstate in unfamiliar areas, what advice can you give for narrowing down investment grade suburbs?
  24. Tammy Nguyen: What are your thoughts on the Logan area in Brisbane?
  25. Sam Hockey: How much does a Buyers Agent cost?
  26. Gaz Slater: How long do you wait for a city that’s nearing the bottom of its cycle before buying. Eg Perth.

 

Episode 026 | Q&A – Property through Trust, Renovating Established Properties, Gentrification and Investing in Regional Centre

We have been receiving a lot of great suggestions and questions from our listeners! If you have submitted a question on property investing in Australia and have yet to hear a response from us, don’t worry. We will get to you as soon as we can. In this week’s podcast, Bryce Holdaway and Ben Kingsley will be addressing some topics on:

  • Ep 26 of TPC - Q&A Property through trust, renovating established properties..Property in Trust from Christ : Can you address investing in trusts? In particular purchasing property through trust and transferring currently owned investment properties into a family trust
  • Tax benefits in renovating established properties from Christian : One of the topic that got me interested was Tax Depreciation, when you had Bradley Beer come in as a special guest. I already have a depreciation schedule, the one thing that plays on my mind – is whether it is worth renovating an established property? Is there a rule of thumb that I should use to determine whether my investment property needs to undergo a renovation? Is there a golden rule to this on when is the best time?
  • Gentrification questions from Andy : What is gentrification and its signs? Does this take a long time to happen? What are the positives and negatives of buying in a suburb that hasn’t had it or is in the process of having a face lift/demographic change? (I’m assuming that is what gentrification is?) Thanks guys!! The podcasts are gold!
  • Investing in Regional Centre from Lewis : Can you offer any advice regarding property investment in a regional centre? Often there are a lot of stones unturned in these markets. I am based 30km from the coast in Central Queensland and medium/high density development is a relatively new concept to most buyers in this area. However, recently completed projects have shown a real interest in this type of offering versus detached dwellings and I am wondering how to interpret this.

 

For access to The Property Couch’s media kit, please email us here: info@thepropertycouch.com.au.

 

If you like this Q&A episode, don’t forget to rate us at our iTunes channel (The Property Couch Podcast) and our Facebook page. Any questions or ideas? Feel free to drop us your thoughts here: http://tpcaustralia.wpengine.com/topics/

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