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Owning an Investment Property can be cheaper than you think

Posted by Andrew Jackson on 16 September, 2016 3:27 pm

Owning an investment property can be far more affordable than you think, particularly when you claim all of the tax deductions available. To explain how claiming these deductions can assist, let’s examine two average Australian taxpayers:

Bill who feels he can’t afford an investment property and Kate who owns one investment property. The Australian Taxation Office allows income producing property owners to claim a number of deductions for expenses involved in holding a property. These would include property management fees, rates, interest, repairs and maintenance. Investors are also entitled to a non-cash deduction for the wear and tear on the structure of the building and the fixtures and fittings within the property over time. This deduction is known as property depreciation.

Kate VS Bill.

Kate earns the same salary as Bill, however she has purchased a three bedroom rental property for $600,000 just over one year ago. Her property is rented at $545 per week, a total rental income of $28,340 per annum. The income earned from Kate’s investment property is also taxable, therefore her total combined income equals $113,340.

Kate is also able to claim deductions for expenses involved in holding the property, such as management fees, insurance, rates, interest, repairs and maintenance. These expenses for a typical three bedroom property would amount to around $39,067. Kate also obtained a tax depreciation schedule from BMT which showed she could claim an extra $14,200 in depreciation deductions in the first nancial year.

The results are in…

From the picture you can see Bill takes home $63,293 income after paying $20,707 in taxes. Kate earns the same take home wage however her income-producing property entitles her to claim $53,267 in deductible expenses including depreciation. This further reduces her taxable income to just $59,073 making her income tax payable $11,814. By maximising the property deductions and claiming depreciation, Kate’s property is costing $35 per week to own after tax.

APP The Key to knowledge

The Value of Knowledge

Posted by Grant Orr on 9 August, 2016 12:36 am

No matter what circumstances information is valuable, worthwhile and normally accessible.

Ensuring you are gaining “Value” from the information you have been given is generally measured or indicated through receiving more than the effort you put in. Within the residential investment property market it could also mean obtaining “confidence in your future”.

Information can be measured in terms of what it can actually do for you. You can purchase books to gain knowledge but it is unlikely you can be educated from the shelf. Great information which educates you and gives you sound knowledge is intangible and should be individual to you, that is, the solutions should be designed to fit your needs and outcomes.

Knowledge can be difficult to appreciate or determine its true value or worth before you actually receive it; the long term strategies of property investment may take
a while. This then tends to result in a leap of faith, in some opinions, yet if you look at it logically, if the information is based on a criteria and logical approach is it that much of a leap? If there is a recipe for a more financially secure future, you’d probably be first in line to pay for it, particularly in times when the market could be volatile.

The confidence of someone who obtains knowledge versus someone who hasn’t can highlight the difference between the financial assets or property portfolio held and presents clear anecdotal evidence of how educated clients view their current and future financial positions.

Purchasing property is one of the largest and most expensive investments generally made. No one has a crystal ball and to ensure that as much risk is mitigated as possible it should be thoroughly researched, analysed and critically evaluated.

The questions we most often hear from people about their financial future are:

  1. Will I have enough money in the future to do what I want?
  2. Am I investing in the right place?
  3. Can I reduce my tax?
  4. What are my options when things change?
  5. How can I keep an eye on my investment property?

There are always different challenges, not only in building a property portfolio but in life itself. Being prepared for those challenges, understanding them and having a core base to support you along the way assists in giving you peace of mind, even if it is through knowing you have support when required.

When we wrap it all up, what outcomes do we aim to achieve or would you expect?

  • Emotional Value – enable you to make a well informed decision about your future
  • Financial Value – through Capital Growth, Rental Returns and Tax Reductions
  • Practical Value – making it simple, following through and saving time
  • Intrinsic Value – facilitating and project managing through skills and knowledge

There is only one thing we can generally predict “You do nothing you will achieve nothing”


Brisbane is a safe bet

Posted by APP Admin on 2 August, 2016 3:41 pm

Investors who are speculating on big capital gains in Sydney and Melbourne look set to be cruelly disappointed – but Brisbane is a safe bet.

BIS Shrapnel believes that house prices in Australia’s two biggest cities will experience limited growth between now and June 2018, while unit prices will actually go backwards.

Sydney’s median house price is forecast to rise 2.1 per cent to $980,000, while the median unit price is forecast to fall 0.7 per cent to $670,000.

Melbourne house prices are expected to climb 3.8 per cent to $680,000, while unit prices are expected to decline 4.0 per cent to $480,000.

However, the picture is different in Brisbane, where house prices are tipped to rise 13.5 per cent to $590,000 and unit prices are tipped to rise 5.7 per cent to $460,000.

Hobart, Darwin and Adelaide are forecast to experience increases in house prices and decreases in unit prices. Perth and Canberra are forecast to experience decreases in both categories.

The Hobart forecasts show house prices rising 4.1 per cent to $380,000 and unit prices falling 1.8 per cent to $280,000.

The Darwin forecasts show house prices rising 2.7 per cent to $575,000 and unit prices falling 2.5 per cent to $395,000.

Adelaide house prices are forecast to grow 1.1 per cent to $455,000, while unit prices are forecast to drop 1.5 per cent to $335,000.

Perth house prices are forecast to decline 2.6 per cent to $565,000 and unit prices are expected to decline 3.4 per cent to $425,000.

Canberra house prices are forecast to decline 1.8 per cent to $540,000 and unit prices are expected to decline 4.1 per cent to $465,000.