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The latest happenings in the Melbourne property market. For our Essays and The Secret Agent Report, see our Research page.


Category Archives For: Tax and Property

Budget 2017 – Winners and Losers in Property

WINNERS

First Home Buyers
First home buyers will be able to use voluntary contributions to their superannuation to save for a house deposit. Withdrawals will be taxed at a lower rate, but the amount you can contribute is capped at $15,000 a year and $30,000 all up. Both members of a couple can take advantage of the scheme.

In Victoria, the state government will abolish stamp duty for first time buyers of homes valued up to $600,000, make cuts to stamp duty on homes valued up to $750,000, and also double the First Home Owner Grant to $20,000 in regional Victoria.

With the first home super saver scheme, we may see increased demand for property below $600,000. This will push up the prices of houses and townhouses in outer suburbs such as Cranbourne. Inner city suburbs will be less affected, as average prices are typically above $600,000. Developers will also have to compete more agressively for development sites that allow sub-$600,000 townhouses to be built and sold in these outer suburbs.

Downsizers
A person aged 65 or over will be permitted to make a non-concessional contribution to superannuation of up to $300,000 from the proceeds of selling a principal residence owned for the past ten or more years from 1 July 2018.

This is good news for real estate agencies operating in areas popular among downsizers, such as the inner city, as there is more incentive for elderly property owners to sell their home. Developers can also benefit from creating stock in these areas. Read the full post


Investment Tips: Time Value of Money

Icon of a clock multiplied by an icon of a dollar note equals a question mark, to illustrate the concept of time value of money.

This week, Secret Agent illustrates the importance of time value of money when investing in property.

There is a saying that money earned today is worth more than money earned tomorrow. The main reasons this is true are:

  1. Inflation (rising price levels deteriorate the spending power of cash)
  2. Interest rates (money that can be invested today earns interest, which compounds over time
  3. Opportunity cost (the ability to use money now rather than having to wait for it)

Read the full post


Property Deductions this EOFY

Often dismissed and put aside for more interesting topics, property depreciation deductions is a topic your average person will cringe about. But is a topic that if understood can make a big difference to a property owner’s cash flow. The Australian Taxation Office (ATO) allows property owners to claim depreciation, or decline in value, as a deduction. As a non-cash deduction, depreciation is often missed. With tax time approaching, property owners should be sure they are claiming all the deductions to which they are entitled.

Owners of income-producing properties can claim depreciation deductions related to the building’s structure as well as the fixtures and fittings within the property. Depreciation related to a building’s structure can be claimed via capital works deduction. As a general rule, residential properties in which construction commenced after the 18th July 1985 and commercial properties in which construction commenced after 20th July 1982 are eligible for the capital works deductions. Depreciation on each plant and equipment asset contained within a building can also be claimed. Examples of these assets include hot water systems, carpets and blinds. 

Generally, newer properties with newer fixtures and more expensive construction costs will attract more depreciation deductions simply because they have not depreciated in value as much as older properties. However, older properties still attract depreciation. It is always worth enquiring about the possible depreciation deductions available on an investment property.

To maximise depreciation deductions, property investors should engage a specialised Quantity Surveyor to complete a tax depreciation schedule. The schedule will show deductions for the life of the property (forty years) and will ensure the property owner claims their depreciation entitlements. The fee for a tax depreciation schedule is a 100% tax deductible and can be claimed straight back this year if ordered by June 30

Article Provided by BMT Tax Depreciation. 
Bradley Beer (B. Con. Mgt, AAIQS, MRICS) is the Managing Director of BMT Tax Depreciation. Please contact 1300 728 726 or visit www.bmtqs.com.au for an Australia-wide service.

No bitter pill to swallow – Avoid Capital Gains Tax

Over recent months we have seen a steady increase in the number of clients that want us to buy property through their self managed Super Funds.

It appears one of the main benefits of doing this is to avoid paying Capital Gains Tax when it comes to realising the asset, this can only be done once the members of the Super Fund are over age 60. Disappointing for those of us not quite at that age.

If you are planning on buying property through your Super Fund, we would suggest that you seek advise from a Financial Advisor as there are many pitfalls in this relatively new area of Super.

One such area catching out investors is buying a property with more than one title. Most apartments will have a main title and a accessory title for the carapace or locker. If the property does have more than one title, further backend work is required by your Financial Advisor in the set up of your Self Managed Super Fund.

Be mindful that your Self Managed Super Fund needs to be set prior to buying a property.

We expect to see a dramatic rise in the number of people using this system to avoid capital gains tax.