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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 124 | Q&A – 20 minutes Saved 20 Years of Regret, Investing in Airbnb, Property Spruikers, Buying Cash Flow Only and the Cost of Commission

Alright folks, it’s that time again … you ask, the boys answer!

After receiving a tabletop full of new topics, we’ve taken our que this week behind an anonymously-sent testimonial. Turns out an earlier podcast Why You Shouldn’t Invest in Property saved our listener from being “sold a lemon by a spruiker”! Yep. Unfortunately guys, the property spruikers are still out there, so Bryce & Ben will be answering similar questions on the red flags to look out for, like:

  • How to sniff out the so called “educators” and get your trust back
  • What your next move should be to fix bad property advice
  • How 20 minutes stopped 20 years of regret
  • What the consequences are with ‘fee for service’ and ‘working for commission’
  • Why the right asset selection can flip the spruikers on their heads
  • What the finance in the first two stages of property investing are
  • Why negative gearing is really only a moment in time
  • How long and how many properties do you need in the accumulation phase
  • What ‘buying only for cash flow’ is, and its risks and rewards
  • Investing in regional area and factors to consider
  • How to spot the difference between a genuine property educator vs a spruiker

and (SUPER TOPICAL)

  • Airbnb Investment: Is it worth considering them?

This is a goodie, especially for those who don’t want to feel the sting of bad investing!

(For those who want to know the website Ben talks about, it’s PIPA.)

 

The questions we’ve handpicked are from:

 

Listener Anonymous (as continued from their nightmare situation, which the boys will read out):

… We have about $200,000 of available equity, but we are now not sure what our borrowing power is as our previous broker was also linked to the spruikers and we don’t trust what they’ve told us. In your opinion, what should our next move be? Ideally we’d like to invest in Melbourne or Sydney but are not sure if it’s the right time to get into these markets.

 

Andy:

Can you guys talk about the finance in the first two stages of property investing? How do we go about understanding the numbers eg loans, consolidation and what is involved how everything works with the finance and loans, what to do with the loans from accumulation stages to consideration stages and onwards?

 

Jonathan:

Hi guys. I’ve recently started listening to your podcast and think it’s great. I’ve recently attended a seminar with ‘XYZ’ company, ‘XYZ’ Education they call themselves. Just wanted to know if you had heard anything about them? I understand there are many of these ‘mentors’ out there—those that are ‘fee for service’ and those that work off commission. These guys are the later. Any thoughts, comments would be greatly appreciated. Thanks in advance.

 

Kate:

What do you think about the idea of buying for cash flow only? I live in Adelaide and there are many areas within 60 – 90mins of Adelaide where you can buy quality character properties for less than $250,000. If only earning an average income, and planning to buy and hold for 15 – 20 years, do you think a larger portfolio of properties like this may be less risky than one or two closer to the CBD, which will have substantial holding costs?

 

Eddie Airbnb:

Hi. I am an avid listener to your podcasts and I started listening to them since 2015, but I have stopped for a year. I have recently bought another investment unit and have started listening to them again. I am currently at episode 51 and it is great because I can listen to them nonstop without having to wait for the next one to arrive in my podcast. Great work, I really enjoy your shows.
I have a question regarding Airbnb. I know it is not aligned with your property investing strategy and overall investing mantra. But recently, it has taken the property market by storm and there are many investors who are doing this to become positive cash flow. It is sort of the elephant in the room and there is a lot of talk about it out there, whether it is in high-rise holiday resort, or brick and mortar family homes. People are doing it. I have recently bought an apartment (yes: high rise, high density, tourist destination, lifts and caretaker) and so far I am cash flow positive, after netting all costs including cleaning, rates and body corporate. I only manage the bookings of the apartment and outsource everything to a cleaner who doubles up as my meet-and-greet host. I also have insurances to cover those times when needed, and I do everything above board.
I would like your views on how your look at Airbnb investment as part of an investment strategy—if it is something that you are interested at discussing.
Thanks.
If you like this Q&A episode (A Transitioning Market, Money, Habits, Tax Deductions and What It’s Really Costing You), 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://thepropertycouch.com.au/topics/

Episode 122 | Q&A – A Transitioning Market, Money, Habits, Tax Deductions and What It’s Really Costing You

It’s that time again … a few questions from you and a few answers from the boys!

Oh, before we give you a tiny tease about today’s podcast … just a huge shout out for being SO supportive about our technical glitch last week. Our inbox was flooded with all of your emails and concerns—please know that our hearts’ burst (with love) and we missed you all too! We really did. But we’re back and better than ever this week. (With an epic guest next Thursday we’ve got The Stig running the server like a pro.)

Right … to today’s Q&A! It’s the time of a transitioning market. So things are starting to balance out in the property scene. The boys will fill you in on the nitty gritty; but, guess what? This is an empowering time for buyers!

Think Question. Think Answer. Think Golf. Blame Bryce for his legendary metaphors.

 

  • Question on debt reduction from Allen:

I am trying to get into a better money management system and have just a few questions.
I currently have 1 personal loan of $22,000 and 2 credit cards both roughly $5000 each. In your previous podcasts about credit card management and The Money SMARTS System you suggest paying off whichever debt charges the most interest first. Well, the personal loan charges more than the credit cards in the long run and has more to pay off although the credit cards are of smaller amount but it is still high, which would you recommend paying off first?

  • Question on how to work out a property’s true value from Laura:

When monitoring an existing Investment Property’s capital growth, and trying to do this in an objective, non-biases and reliable method, can you please compare and contrast—get the advice—just relying on a real estate agents sales appraisal vs. a proper bank valuation?

My wife and I bought a house (PPOR) in Croydon Vic 2.5 years ago, which has since appreciated by nearly 20%. We are looking at buying our first investment property this year, around mid-year. We had a child last year, my wife will be going back to work part time mid-year and is currently on maternity & LSL. My salary will be about $100k more than hers.

Will it make sense to get the investment loan out in my name so that the losses can be claimed against my greater income? For some reason she is apprehensive about this idea, which I’m not sure why because we are married anyway and the titles can still be put in both our names even though the finance is in my name. Is this worth considering this or should everything just be in both our names, joint loans the like?

 

And here are the Free Resources mentioned in today’s podcast:

 

If you like this Q&A episode (A Transitioning Market, Money, Habits, Tax Deductions and What It’s Really Costing You), 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://thepropertycouch.com.au/topics/

Episode 108 | Five Ways To Improve Affordability

Back in Episode 102, Bryce and Ben discussed if we are facing an affordability issue and when Jan Somers appeared on our show last month, she mentioned that her aunt was also concerned about housing affordability back in the 1950s. Now, with the Federal Budget just a couple of months away, this topic appears yet again, and it seems to be the favourite amongst our politicians.

This time, the debate is about improving affordability for first home buyers. Now, don’t get us wrong. The Property Couch believes in the Great Australian Dream and owning your home. But as mentioned before, your first home will not be luxurious nor will it tick all the criteria of your dream home. This is about setting the right expectation because you would get to your dream home, and you would be able to get that quarter acre house eventually. But it will not happen overnight. You need to work for it, and you need to be smart with your decisions especially when it comes to money and planning for the future. Your first home, may not be your dream home but this does not mean that your second or third home wouldn’t be.

That is why education around property and awareness on the risk of investing in property is so important. This is one of the suggestions that Bryce and Ben chat about to improve affordability in the Australian Property Market. Tune in to find out the rest.

And the other stuff mentioned in this episode are:

  • Has the Way We Look at Financial Stability Changed Since the Global Financial Crisis? – Speech by Michelle Bullock, Assistant Governor (Financial System) of RBA: Listen/Read Here
  • Core Logic’s Pain and Gain Quarterly Report : Download Here
  • Fact Sheet on Guarantor Loan : Download Here
  • Bryce’s video on the four players in the industry is part of the Property Formula video series. If you are interested to watch this, you can Register Here

 

And as always, if you like this episode (Five Ways To Improve Affordability), don’t forget to rate us on our iTunes channel and our Facebook page. Any questions or ideas? Feel free to drop us your thoughts here: http://tpcaustralia.wpengine.com/topics/

Episode 103 (Part 1) | Chat with Jan Somers, Housewife And Property Multimillionaire

We are extremely excited here on The Property Couch this week to announce the long-awaited meeting with our special guest today, JAN SOMERS (as we’re sure you would agree)! With a successful property portfolio spanning over 40 years with countless properties within the country, Jan is an inspirational, property-investing mogul who we all could learn a lot from. As we gained so much gold from the hour-long chat, we’ve had to split the episode into two! In this first part, Bryce Holdaway and Ben Kingsley discuss the following areas with Jan:

  • What got her into property investing back in 1972 and how did she build her portfolio since then
  • Her mentor in life and her outlook in education and continuous learning
  • Her point of view and experience on negative gearing
  • How did she structure her loans and what kind of loan strategy does she have for her portfolio
  • Tips on improving your borrowing power
  • What motivated her to write her books, Building Wealth
  • Having the right mindset as an investor

And so much more! As Jan is someone who has a continuous passion and drive for property investing, this is definitely a 2-part episode you will not want to miss. Her journey through property investing is definitely a story worth listening to and reading up on so make sure you tune in.

Here’s the link to her books and the PIA Investor software: Click here.

 

And as always, if you like this episode (Chat with Jan Somers, Housewife And Property Multimillionaire – Part 1), 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/

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