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Episode 231 | Q &A: How Will Changes to Negative Gearing Impact Investors?

Have you ever wanted to know how the changes to negative gearing will affect YOU???

Because folks, let’s face it… Labor’s policy to turn the lights out on negative gearing isn’t just going to affect the property market and potentially the ENTIRE Australian economy… the policy IS going to impact property investors, whether we like it or not.

So we want you to be prepared and know what’s coming our way! And that’s why earlier in the week, we asked our Facebook Tribe, “What’s your #1 Question on Negative Gearing?”

And, as you can imagine, today we’re going to be answering as many of these questions (there were LOTS) as humanly possible (well, without having this episode drag on for a day and a half!)

We’ll also be covering WHAT EXACTLY Labor is proposing to change, when these changes are officially kicking in, how it impacts the losses you can claim etc. etc. etc…

(See below for FULL LIST of Questions).

A bit of housekeeping…

*New* ENCORE WEBINAR ANNOUNCED: How to Master The Property Investment Formula That Works in Any Market

When: 2:00PM, Friday 10th May 2019

CLICK HERE to Register & Get FULL Details (Last Chance Encore Webinar)

or go to www.thepropertycouch.com.au/webinar.

.. And PICA is also throwing a webinar TONIGHT at 7:00PM Thursday 9th May including a Market Update from Tim Lawless, Director of Research at CoreLogic as well as a deep dive into Negative Gearing and Labor’s policy. To watch, you need to be a PICA Member (or become a member for $5) — If you want to watch, you can find out more about the PICA webinar HERE.

FREE RESOURCES MENTIONED:

  • To Access Ben’s Negative Gearing Series CLICK HERE
  • To Get Ben’s Latest RBA Cash Rate Announcement CLICK HERE
  • We’ve announced the winner for our Denise Book Giveaway! Brook Lyn, if you’re reading this, please get in touch with us on Facebook or info@thepropertycouch.com.au. And for the rest of you who participated, thank you so much as well! We’d love to give you a copy of our newest best-seller, Make Money Simple Again. Just get in touch with us with your name and best postal address and we’ll send it to you!

THE EXACT QUESTIONS WE ANSWER:

Thank you for sending in your question to our post below as well! Let’s jump in now and of course, if we’ve answered your question, please do get in touch with us on Facebook or info@thepropertycouch.com.au and let us know which book would you like (Make Money Simple Again or The Armchair Guide to Property Investing), your name and best postal address!

Question from Scott
If negative gearing is scrapped and grandfathered what will be the effect on a property you withdraw equity from after the rule is put in place? Will the increased debt on the property keep it negatively geared when you have done the release after the potential rule is put in place?


Question from Pat
If you currently have a PPOR, will you be able to draw equity and use as a negatively geared investment loan AFTER Jan 2020 or whenever they propose the change happens?


Question from Nicholas
If you currently have a PPOR that you plan to change to an investment property in the future, is the grandfathering based on when the property is purchased or when it is switched to investment?


Question from Michelle
Looks like my question is along similar lines to above so no doubt this will be covered. We’ve just purchased PPOR but may look to turn into investment in future. Queries around the timelines for both living in now, then renting out, then selling (6 year rule?) and what impact new government legislation may have?

Question from Jake


Question from Jake
Is it the property or the loan that is grandfathered? (Property I assume.) And what, if any, are the considerations when refinancing, assuming the new changes come in?


Question from Anne
If Negative Gearing is scrapped on established properties and only allowed on new constructions, but the construction industry is already slowly to a halt, and capital growth often in the red, how viable is Property Investment as a means of securing your retirement in the next 30 years?


Question from Martin
What is the experience with this type of tax scheme in other countries? Is there evidence of its impact on the real state bubble?


Question from Karen
Why are there policy attacks on LRBA property borrowing? Apparently based on the evils and risk of negative gearing… however, borrowing does not necessarily mean negative gearing, it just means gearing.

Question from Ray


Question from Ray
Many economists predict an increase in rental prices of negative gearing is abolished. Since only the initial part of the loan is negatively geared (as it is later positively geared and therefore taxable), will this have as much of a negative impact on the property market as predicted? Or is it the combination of the abolishment of negative gearing as well as the reduction in capital gains discount that will cause the knock on effect over time and make property investment less attractive?


Question from Simeon
Are there any other countries without negative gearing that we can compare with to predict the direction of Australia’s investment property market?


Question from Anastasia
I’d be interested to know your thoughts at a more macroeconomic level around what affect you think this might have on the property market over the medium term. One thing that comes to mind is potentially an increase in larger blocks being subdivided/developed into multiple townhouses for tax purposes.


Question from Jillian
Is negative gearing based on a whole portfolio or individual properties? One is positive and one is negative — do they cancel each other out in your tax return or are they assessed individually? And will this continue to be the case is Labor get in?


Question from Timothy
What would be your preferred solution to the problem? Negative gearing capped to % of income? Fixed maximum deduction? Or something else?


Question from Leo
When will the next election be after the upcoming election? For us investors to know how long we have to purchase some properties.


Question from Alex
Love the content guys! In your opinion does the removal of negative gearing make implementing The Four Pillars any more difficult, and would you recommend purchasing my first property before or after January 1st (when the grandfather rules will take place)? Would love to hear your thoughts as this is currently my big block to buying!


Question from Dale
It seems to be argued that negative gearing should not apply to the super wealthy who own 5, 6 or more properties. Should it be based on the $$ value on a property or portfolio rather than the number of houses owned?


Question from Liam
Unfortunately, it seems inevitable that it will happen; is there any positives at all we can take from it? Does it change any fundamental principles when it comes to property investment?


Question from Tom
One thing that has not been made clear in all the discussion is what happens to the investment losses if you were to buy an established property after negative gearing was removed? Are the taxable losses you incur simply lost or do you hold onto the losses and they can be used to offset future investment income once the property moves into a positive geared position down the track? I know this is the case for some countries that do not allow negative gearing and then it just makes it a timing issue as you access these benefits in the longer term.

Question from Matt


Question from Matt
With regards to the grandfathering that is proposed, is it the property that is grandfathered or the loan? How do they determine this? What happens if I refinance etc.


Question from Tania
I would like to understand better the reasons why Labor repealed the cancelled negative gearing in the 80s. Surely there are some lessons there that we can look to. So I guess the question is, What were the outcomes last time Labor cancelled negative gearing that caused them to re-introduce it?


Question from Mustafa
Most experienced property investors have stated that negative gearing is not a property investment strategy, but most property investors rely on it. If negative gearing is not a property investment strategy (not saying it is or isn’t), then why is it such a hot topic of discussion ever since Labor had intentions of removing it if won? Just curious.

Episode 228 |Ownership Structure & Trusts with Julia Hartman – Everything You Need to Know About Property Tax (PART 2)

Here we go, folks…. Property Tax PART 2 is finally here!!
So, let’s get down to the Ownership Structure, Trusts and SMSF insights you need!

If you tuned into Episode 226, then you’ll know we have none other than The #1 Property Tax Expert in Australia… Julia Hartman, unpacking the gold for you!

Julia is the Founder of BAN TACS, a co-operative of Accountants, which has been helping thousands of Australian’s navigate the world of tax since 1992!! She has a Bachelor of Business and is a Chartered Accountant (CA), Certified Public Accountant (CPA) and a Registered Tax Agent…. which, if they don’t mean much to you, translates to this — “impressive” and “rare”!!

PLUS, because we knew she was coming, we threw it out there for our listener’s to ask us their most pressing Tax Q’s they have — and Julia’s going to answer the last of these today and dishing out her top tax tips on ownership and borrowing tax structures!

Get the answers to…

Before we get to today’s questions, we want to let you know that we’ve compiled all of Julia’s Answers and Additional Resources into a PDF! If you’re interested, then just fill in the form below and we’ll send it to you right away. 🙂

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Today’s Ownership Structure and Trust Related Questions:

Question from Ben:

When investing for the long term as a couple (with one partner’s income considerably higher than the other), what are your top tax tips to consider when determining ownership and borrowing structures.

Question from Locky:

What is the best tax structure for being able to keep borrowing (family trust or company)? Buy build and rent out for passive income? Thanks guys.

Question from C L Wong:

Should we open a company to manage the residential properties or a trust perhaps? If so, what are the tax benefits do we have? Thank you, Gents 🙂

Question from Alistair:

How to transfer property between entities (company to trust or company to personal name). Investigate how the family law act interprets this. Thanks.

Question from Damien:

Is there any point in getting a tax depreciation schedule anymore for existing fixtures (since recent changes)?

 

Question from Paul:

Is there any point getting a depreciation schedule done on a brand new build IP considering I can just give my accountant the exact costings of the build to depreciate?

Question from Pete:

I want to know: am I able to claim tax deductions if I rent out 1 or 2 bedrooms in my home? If I rent out 2 bedrooms in my 3 bedroom home, am I able to claim two thirds or my rates, Strata, etc?

Question from Matthew:

When renovating an investment property to what level must you renovate the IP so it can be classed as a “Substantial Renovation” to allow you to claim it as a depreciating asset?

Question from Andrew:

Would love to know if we have any further clarification on the possible negative gearing changes from Labor are we able to still offset our income with interest down to 0 but not claim it as a loss i.e. negative gearing or is there plans to take away claiming the interest charges at all so all income is classed as income.

Question from Nick:

How do I transition my investment property at retirement with minimal tax impact?

Question from Kosta:

What implications must we consider if we go down the short-let Airbnb route?

Question from Sandy:

How do you choose/ find a quality property investment savvy tax accountant? Thank you for all your insights

Question from Sineth:

How to differentiate investment savvy/specialist tax agent and general Tax agent? What outcome Investment savvy tax accountant can bring in to table? Cheers

Question from Iain:

What sort of benefits could one expect from a property investment savvy/specialist tax agent over a generalist or do it yourself?

Thanks again for sending in your questions on Facebook folks! All of the answered questions will get a free book so make sure to reach out to us at info@thepropertycouch.com.au! 🙂

Episode 226 | Capital Gains Tax 101 with Julia Hartman – Everything You Need to Know About Property Tax (PART 1)

Property Tax… let’s have a real conversation about it folks!

Because if we’re being honest— even with 40-odd years of industry know-how between us (and an accounting degree wedged in there as well) — there’s still a bit of property tax knowledge we could use too.

And if you’ve listened to us for a while now, you’ll also know that, when it comes to tax, we’re only allowed to talk about “Statements of Fact” — as we’re not qualified to give advice in this area.

So it’s GREAT NEWS that today’s guest is absolutely, well and truly, qualified to dish out the Capital Gains Tax, Depreciation Benefits, Trusts, Ownership Structures and ALL of the property tax perks & pitfalls!! In fact she’s SO qualified and willing to share what she knows, that we stole a couple of hours of her time to deliver you TWO EPISODES – today, clearing being Part One.  😉 

Who’s our epic guest?

Oh, “just” The #1 Property Tax Expert in Australia… Julia Hartman!!!

To give you an idea of the calibre of skill set we’re working with here — Julia is the Founder of BAN TACS, a co-operative of Accountants, which has been helping thousands of Australian’s navigate the world of tax since 1992!! She has a Bachelor of Business and is a Chartered Accountant (CA), Certified Public Accountant (CPA) and a Registered Tax Agent.

Ben’s also been admiring her work since “way back in the day” when she first began writing tax articles for Australian Property Investor Magazine, sharing the insights that a lot of property investors out there simply don’t know about.

PLUS, because we knew she was coming, we threw it out there for our listener’s to ask us their most pressing Tax Q’s they have — and Julie’s going to answer plenty of these today and next week.

Today’s round… Capital Gains Tax!!

But, of course, we also had quite the week, including….

  • Federal Budget ANNOUNCEMENT on Tuesday night (2nd April 2019)
  • DATE FOR NEGATIVE GEARING — 1st January 2020
  • RBA Cash Rate Announcement for April
  • Comments on Negative Gearing from Chris Bowen, Shadow Treasurer of the Labor Party, on ABC’s Insiders: The Interview (Listen to ABC’s audio here)
  • And Ben is in Canberra to present at the Housing Panel!!!

… SO we’re going to tackle these guys at the START of the show.

And of course, the Resources mentioned in this episode are:

Today’s Capital Gains Tax (CGT) Questions:

|42:38| Question from Joshua:

If I have purchased a block of land but choose to on sell it prior to settlement, but the new purchaser’s don’t settle, would I be taxed on the 10% deposit the new purchaser pays in the event that they don’t follow through with the sale, leaving me to settle on the land?|

 

|44:13| Question from Brendan:

What is the threshold between claiming all renovations/maintenance in one year, vs having to stagger it over “X” years?

|48:50| Question from John:

If 5 family members own 1 investment property, can the income be all directed to 1 person or must it be 20% each?

|50:34| Question from Alisdair:

Hypothetical question. I have a PPR and I decide to build an extension and use it to rent out, Airbnb or lease to a tenant. Is the deductible percentage based on square metres only? Any other considerations that should be made, such as a common garage? Will the build be able to be depreciated as a capital works deduction? When I sell my PPR, it won’t be without CGT, will it only the same square meterage that is subject to CGT? The answer to these questions makes it clear if it is a worthwhile proposition.

|58:16| Question from Andrew:

When selling an investment property, how does the depreciation you have claimed on the investment property affect how your capital gains tax is calculated?

|1:01:47| Question from James:

Are Stamp Duty and Capital Gains Tax affected for first home buyers when purchasing a property for the purpose of investment vs owner-occupied?  Also, if the property is initially purchased as an owner-occupied property but later turned in to an investment property what is the tax outcome of this both throughout the life of property ownership and when the property is sold (further down the track).

|1:03:37| Question from Karen:

If I move out of my PPOR and turn it into an investment, then sell it after 6 years, how is CGT calculated?

|1:06:27| Question from Josh:

Can I claim any ongoing CGT discounts if I move and rent out my PPOR if I move into a rental myself?

|1:08:09| Question from John:

I will be looking at losing close to $80k on an investment property I have held onto for 12 years. Just wondering how long I can carry this capital loss over for? And how the whole offset process works…. (ie would a $80k profit in the future completely be offset against this loss?)

|1:10:25| Question from Richard:

I recently tried to work out how to calculate Capital Gains Tax that I would pay on an investment property but the ATO’s website made it very hard to do this. Is it just a straight 50% of the profit made OR does it matter how long you hold the property OR does the profit then go into your yearly income and the percentage is worked out that way?

Episode 223 | Q&A – How to Overcome your Fear/Uncertainty in Taking The Next Step

Folks, feeling a bit scared to take that necessary “leap of faith” on the property market?

If you do, it’s not your fault. In fact… it’s actually pretty normal!!

So, we’ve taken a leaf out of last week’s episode where we answered some of your questions on the BIGGEST CHALLENGES you’re having in a market downturn…and we’re going to dive in on the fear and uncertainty piece! Because a little bit of fear is normal… but if it gets in the way of you and your future, it becomes a BIG, BIG problem.

To help you out, today we’ve got SIX Lessons for you (straight off the bat) as well as a whole bunch of listener concerns we’re going to unpack so you know the best way forward to make the leap, stay the course, handle the Government changes, hold down the fort, invest in a market downturn and much, much more!

 

Before we give you the specifics, just a quick shout out that we have an Encore Webinar happening TOMORROW, Friday 15th @ 2PM, 12th March 2019!!

CLICK HERE to Register – How to Build a Property Portfolio in a Market Downturn and Retire on $2K Per Week

 

Also, ONLY ONE WEEK LEFT to Get 20% DISCOUNT on SELL or HOLD

Use this discount code: TPC20

 

Today’s Lecture Notes…

Episode 222 | Q&A – The Biggest Challenges You Face in a Market Downturn

“What’s your BIGGEST Challenge when it comes to building a portfolio in the Current Market?”

… Folks, this is the question we threw out on Facebook and to our tribe of listeners who receive our emails… and we received a FLOOD of answers back!

So it seems a few of you are facing a pickle or two as we speak (Or were simply keen to grab a copy of our book for free — that’s what we promised if we would read your challenge out, right?)  Well, to help you out, today we’re going to unpack quite a few of these and, with a bit of luck, dish out the gold into how to SOLVE some of these problems…. because pickles are meant for the pickle jar 😉 #dadjoke

No surprises on the stand outs — GETTING FINANCE APPROVED and FEAR are the main culprits here folks! So we’re going to tackle these, but, of course, we’ve also done what we do best & thrown a few hairballs in the mix for good measure.

Before we pick the lock on the ol’ treasure chest, just a wee bit of gold for you right away…

 

We’ve got an exclusive LIVE Masterclass coming your way THIS Wednesday!

Details: How to Build a Property Portfolio in a Market Downturn and Retire on $2K Per Week without having to renovate, re-develop or sacrifice your weekends!

CLICK HERE to Register Now

Just a heads up… this exclusive training will definitely help the folks who are facing challenges right now, or are simply keen to succeed in property investing no matter what the market’s doing. Unfortunately, we WON’T be making this available on our website (the content’s too “hot”), so register to get further details.

 

Quick, did you know… Bryce is… 1. On Escape From The City tonight (ABC TV @ 8PM and ABC iview) and, huge news, 2. Escape From The City is UP FOR A LOGIE AWARD!!! Vote for the show here on the Most Popular Lifestyle Program (voting ends Sunday 31st of March).

 

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