Where and How Do You Get The Money

[VirtualVagabond]

I just typed a heavyweight reply, and had the whole damn thing disappear when I hit 'send'

It's tempting, but wrong to try to compare real estate industries in different countries. They look the same because the land and buildings look the same, and there are some similarities that muddy the water even further. On top of that, we all overlay our experiences in our own country with the industry in another country.

That's dumb, about as practical as comments from a trawler skipper on how to heave to in a ketch (cruising content for the mods )

Avb3, you're quite right. We do have a capital gains tax here, but only when you actually sell, and only on investment property. The family home is exempt, but we don't get the tax deduction of interest on the home here either, or any expenses or depreciation etc.

The capital gains tax on investment property is arrived at by the net sale price(after selling expenses, commissions etc) minus the purchase price, including all capital costs, like stamp duty, improvements, even inflation at the official rate over the period.
But obviously the difference between this figure, and the depreciated value on your books is taxable at whatever tax rate is applicable to you due to other incomes.
The ideal is to try to sell in your first year of retirement, or any other 'unemployed' year, to get the benefits of the income tax scale working for you.

As to the 'Smart' time to sell... when you're 6 ft under.
If you're a property investor, and not a speculator, you will have done your homework at the time of purchase and there shouldn't be a reason to sell. Any negative cash flow in the early stages, including paper write offs like depreciation, will have stood you in good stead in your high tax paying years from your job or business. If you don't sell, the depreciation write offs can't come back to bite you on the bum

Over time the rental income will have gone up and be a positive income stream, and any capital growth will also be tax free accessable as per earlier post.

[VirtualVagabond]

Originally Posted by hellosailor

I'd still bet there's a better choice of real estate, where the rental income provided a PROFIT instead of a loss, and the real estate value was still growing. If you can't rent it for a profit--the odds are still that the value isn't all that high to begin with, compared with a better property. Most landlords make profit from thir rents, every month, or they find another business.

That was the case here until about 8 years ago. Then the property market went mad and so did prices. We know property is overpriced here, but it's hard to see how it will change as long as we have dumb state and federal governments so addicted to to the revenue stream from developers. New land for building can have half the selling price going to governments.
The supply and demand thing still has way too many people chasing too few houses, so while prices have come off 10-20%, we're not likely to suffer the collapse you guys have been gutted with, IMO. We also have a mining boom and unemployment is under 5%.

In any event, the selling prices are academic only, as long as you're getting a growing rental return that will become positive even if it isn't in the beginning... kind of agrees with your point.

[VirtualVagabond]

But all of that was a waste of time. This is how you do it...

[MarkJ]

Originally Posted by VirtualVagabond

I just typed a heavyweight reply, and had the whole damn thing disappear when I hit 'send'

Yeah, that sux.


If you have a look at the population maps attached you will see that the US has people splattered all over the joint. However Australia's population is in a tiny part of the country because the rest is full of kangaroos, Emus, Bungarrows, 5000 types of poisonous snakes and naked women. 90% of our population lives in 10% of the land surface.

Further, US cities are often expanding into the 'Burbs. Whack in another freeway and population can spread. In Australian cities that can't happen as easily: Sydney is bounded by ocean and mountains on 3 sides. there isn't more usable land. Melbourne has a sludge pond called a bay, and mountains to cut off development except in 1 direction. Adelaide is the same.

So like Manhattan if you can't build more houses the price goes up.

All this is neatly supported by an influx of migrants into just 2 cities, Sydney and Melbourne.

Lack of good land, low taxes, tighter fiscal control on lending and an affluent population all mounts up to solid investments in Real Estate.... if one buys fairly well.


Mark

[VirtualVagabond]

Hey Mark... we could do a 2 man dog and pony show on Aus property, in the US... sell a little snake oil... preach a sermon... move on...

[MarkJ]

Originally Posted by VirtualVagabond

Hey Mark... we could do a 2 man dog and pony show on Aus property, in the US... sell a little snake oil... preach a sermon... move on...

We could. But I think our audience has deserted us. We will have to remember to put 5200 on the seats so folks stay till the collection plate is passed.

[avb3]

Originally Posted by MarkJ

Look the 2 countries USA and Australia have completely different laws.
Yes when selling a house thats not the Principal place of residence you pay capital gains tax.

but we pay no anual tax on our principal place of residence. Only on investment properties when the combine value of investment land is over a threshold. Which for New South Wales is $400,000 or sommit. Not including value of the buildings. Even then the rate is far lower than what you guys pay in Thou Per Million.

Div 43 ITAA97 is the tax code that applies... I just read it

Is it not also true that to qualify as an Australian resident for tax purposes you have to be there for 6 months of the year? I'm pretty sure I read that also.

What about change in use? When your primary residence becomes a rental property, is it not taxed differently.

As far as depreciation is concerned, it is my understanding that is assessed on the basis of actual construction costs, and if you don't have them, you can apply to have the amount adjudicated. I doubt if you can depreciate current value.

Basic capital gains tax issues for legal practitioners
Note that link is our tax departments website.

Yeah, it pretty well says what I thought it would.

"In addition to any CGT consequences, the sale will result in a balancing adjustment event happening to each depreciating asset (such as carpet and curtains) included in the sale. As a result, your client may have to include a balancing adjustment amount in their assessable income or they may be entitled to a deduction."

In short, your taxed on recaptured depreciation.

Now, do you want me to do your tax for you?

Naaaa... i know the game too well to let anyone else set things up. Besides, me and the tax department (not the IRS as you assumed, but the CRA - Canadian) have an understanding that I suspect if there are any additional cooks in THAT soup it would end up with waaaaay too much salt.

[VirtualVagabond]

Originally Posted by avb3

Div 43 ITAA97 is the tax code that applies... I just read it

Is it not also true that to qualify as an Australian resident for tax purposes you have to be there for 6 months of the year? I'm pretty sure I read that also.

What about change in use? When your primary residence becomes a rental property, is it not taxed differently.

As far as depreciation is concerned, it is my understanding that is assessed on the basis of actual construction costs, and if you don't have them, you can apply to have the amount adjudicated. I doubt if you can depreciate current value.

That's in interesting point... never crossed my mind. I'd be interested to know the implications if we're out of the country for longer periods.

Regarding change of use, that does muddy the water a bit. You can claim all expenses including depreciation during the time that you have rental income from it. If you eventually sell the property, you will only be up for capital gains tax if it has been a rental property for more than 5 years (or the figure may be 7... not quite sure). But it must have been your family home initially for this exemption to apply.

If it's a new building, you depreciate construction costs.
If it's an older building, the best thing is to get in a QS who, for about $500 will draw up a schedule maximising your legitimate claims... but basically it's the purchase price less the value of the land, and then a higher %age dep. for soft furnishings, hot water system, stove etc.

[MarkJ]

Originally Posted by avb3

Is it not also true that to qualify as an Australian resident for tax purposes you have to be there for 6 months of the year? I'm pretty sure I read that also.

That affects the income tax free threshold and Capital gains Tax. It doesn't necesitate being in the country physically. Its a bit more tricky if one is making an income outside Australia and has investments and income inside Australia. That needs an accountant to advise.

What about change in use? When your primary residence becomes a rental property, is it not taxed differently.

Change of use is fine. Just needs to be varifiable. Keep the electricy bills etc. while its the PPoR. When its a rental property Capital gains tax is involved, state land tax, and income tax.

As far as depreciation is concerned, it is my understanding that is assessed on the basis of actual construction costs, and if you don't have them, you can apply to have the amount adjudicated. I doubt if you can depreciate current value.

There are special companies that do it. http://www.bmtqs.com.au/
You can depreciate depending on when the building was erected, as the depreciation is over 30 years, and substantial renovations.



In short, your taxed on recaptured depreciation.
I can't see why as Captial Gains tax is on the increased value with renovations deducted.

Maybe an easy way to show you is this calculator Capital Gains Tax Estimator - Tax Calculator - Your Mortgage Australia

[VirtualVagabond]

... And then leaping onto the stage from my left is Mr Twinkletoes Jensen... he taught Michael Flatley everything he knows... Take it away Mark...

[avb3]

Of interest is what a friend of mine did.

He like taxation as much as most of us. Then he found out that Panama does not tax residents there IF the money they make is from outside of the country.

Sooo, within a 3 month period, he sold everything here in Canada, bought a condo in Panama, and setup his company there, still selling to his clients in the U.S.

Trick was to avoid Canadian taxation he had to get rid of anything that smelled like he was intending to come back here... savings plans, bank accounts, house etc.

He's been there going on 5 years now and wouldn't change a thing.

[pullord]

Originally Posted by avb3

SCTPC - I recognize that charges of depreciation are against house and not land, but I would be wary and check with a good tax specialist as to what happens when you sell; I repeat that most jurisdictions I am familiar with recaptured depreciation whacks you hard at sell time.

As far as booms and busts in real estate markets, I just have to look at my own area. My neighbors house sold for 400K 3 years ago. I will be lucky to get 300K now for mine (I live in oil rich Alberta). A similar house to mine in Phoenix or Florida would be lucky to get 50K (built 1961, 1200 sq ft).

The "smart money" said that I was nuts to sell mine 3 years ago. The same "smart money" says there is another boom coming to Alberta, and don't sell now.

Methinks sell here, buy in Florida, and go sailing is the right answer.

many generalities in real estate since mortgage-market crash of fall2008,,my uncle has 1960's bungalo backing onto camelback golf course off lincoln dr. in phoenix{scottsdale neighbourhood} that actually kept appreciating in value through 2008{location,location,location} is important no matter what city,,sq, footage is approx 1600 with carport{no garage} and its worth over a million,,i can understand the gamble you made in alberta real estate as i have friends there as well,,one sold a 40acre spread on edge of govt park{kananaskis country}with small {900 sq ft house} for 750k in 2006 and now only worth half so real estate can truly be a gamble more serious than stock leveraging if your using mortgage money and the rates go up while market values go down,,i personally had a 14% mortgage on rental bldg. in 1980's and learned my lesson young,,i didnt loose my shirt but got good at doing every repair i could learn myself including plumbing and drywall while property taxes and utility costs continued to rise and i could not raise rents as vacancy rate was high due to the sheer volume of empty houses that homeowners had lost due to high mortgage rates,,SO,,SIMPLY PUT,,the secret is to work and save and consider every 1000 you save 1 months retirement costs on a paid sailboat{no payments} with minimum insurance. the contributer to this thread that figured out that 5000{in the bank}became the same 250k the house was worth was correct,,most neighbourhoods are like that in north america especially if you factor in the 4400yr roperty tax on most 250k homes in major cities and you can understand why homeowners our leving the keys in the mailbox of their over-mortgaged home and walking away and declaring bankruptcy{alberta has highest bankruptcy in canada}as california/nevada/florida has highest in usa,,most bankrupts also throw in their credit cards at the same time as well as income tax so real estate speculating affects more than just real estate,,the under-water mortgage problem of usa in 2008 is not over and has allready spread into certain canadian markets especially canadian condos where banks have to consider condo fees as part of the qualification process and 35yr amort. terms no longer legal unless ortgage is cash/securities secured and not based on rental income/salary/net income,,OF COURSE the mortgage brokers are squaking but the banks mortgage insurers have influenced these recent regulations to avoid a sudden usa-type meltdown of banks requiring govt intervention,,beware the fast buck as big risk does not always bring big returns{JUST BIG LOSSES AND A RUINED CREDIT RATING} while the mortgage broker sits in the local tavern bragging about his new cadillac,,cheers

[Doodles]

Originally Posted by MarkJ

Yeah, that sux.


If you have a look at the population maps attached you will see that the US has people splattered all over the joint. However Australia's population is in a tiny part of the country because the rest is full of kangaroos, Emus, Bungarrows, 5000 types of poisonous snakes and naked women. 90% of our population lives in 10% of the land surface.

Further, US cities are often expanding into the 'Burbs. Whack in another freeway and population can spread. In Australian cities that can't happen as easily: Sydney is bounded by ocean and mountains on 3 sides. there isn't more usable land. Melbourne has a sludge pond called a bay, and mountains to cut off development except in 1 direction. Adelaide is the same.

So like Manhattan if you can't build more houses the price goes up.

All this is neatly supported by an influx of migrants into just 2 cities, Sydney and Melbourne.

Lack of good land, low taxes, tighter fiscal control on lending and an affluent population all mounts up to solid investments in Real Estate.... if one buys fairly well.


Mark

You forgot the rising sea levels ... means less land available for building so more pressure on what is available.

Rising sea to swallow our coast, thousands of homes at risk | thetelegraph.com.au

[VirtualVagabond]

Originally Posted by Doodles

You forgot the rising sea levels ... means less land available for building so more pressure on what is available.

Rising sea to swallow our coast, thousands of homes at risk | thetelegraph.com.au

So..... who are the inconsiderate idiots trying to stop global warming?
Anyone want a waterfront at Ayers Rock?

[Palarran]

Originally Posted by Lifegoal2sail

[COLOR=black][FONT=Verdana]I can't understand how they (or anyone) finance it. I see costs running 20-50k a year, but these people don't work. So either these people are silver spooned kids or filthy rich. My question is how do you support your HABBIT?

Here's the answer you've been looking for:

http://www.cruisersforum.com/forums/...afe-62313.html

Very simple!!